Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- Exercise 1arrow_forward6 Project A requires a $375,000 initial investment for new machinery with a five-year life and a salvage value of $43,000. Project A is expected to yield annual income of $22,700 per year and net cash flow of $93,750 per year for the next five years. Compute Project A's accounting rate of return. 04:19:42 Numerator: Accounting Rate of Return Denominator: Accounting Rate of Return Accounting rate of returnarrow_forwardQUESTION 5 GoGo Inc. is considering a new project that requires an initial investment of $36140 and will generate a net income of $5518 per year, if the project's profitability index is 2.8, the present value of the project's future cash flows is $ Round to the nearest dollar.arrow_forward
- question 11 What is the present value of investment A, B, and C at an annual discount rate of 24 percent?arrow_forwardQUESTION 7 A project has a 0.8 chance of quintupling your investment in a year and a 0.2 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? O 100.00% O 140.00% 180.00% O 220.00% 260.00% None of the abovearrow_forwardQuestion 1 Davidsons Incorporated is using Payback Period and Net Present Value (NPV) methods for investment decision making for small projects. The cut-off period will remain at 3 years. The net after tax cash flows of the projects are as follows: Cash Flows Initial Cost Year 1 Year 2 Year 3 Required: Project 1 £11,000 £5,000 £5,000 £5,000 Project 2 £20,000 £7,000 £5,500 £4,000 Project 3 £8,000 b) Explain the uses, limitations, and merits of the Payback Period compared to Net Present Value in investment appraisal. £3,000 £3,500 £4,000 a) Calculate the NPV of each project at 9% discount rate. Given the above four projects' cash flows and using a 9% discount rate, which projects that would have been accepted under Payback Period will now be rejected under Net Present Value? Project 4 £19,000 £11,000 £12,000 £0arrow_forward
- Question A22 A project initially costs £297,000 and is expected to have a useful life of five years at which point its scrap value will be £32,000. The project is expected to yield operating profits of £94,000 per year over its useful life. What is the accounting rate of return? (2d.p.)arrow_forwardQuestion 6 Year a. DORIAN Enterprise has developed a four-year investment plan which is expected to generate the following cash flows: 1 2 3 4 Cash flow GH¢ 30,000 45,000 48,000 50,000 The opportunity cost of capital is 18%. How much is this investment worth today? b. The financial data of DORIAN Enterprise is given as follows: Details Operating income Amount GH¢ Financial expense 275,000 47,000 Net impairment loss, gross loan portfolio 53,000 Operating expense 122,000 Gross loan portfolio 125,000 Delinquency + 1 month or more 14,000 Net subsidy 26,000 Interest rate charged on loans = 18% i. Compute the Subsidy Dependence Index (SDI) ii. Compute the Operational Self Sufficiency (OSS) iii. Compute the Portfolio at Risk (PAR) of DORIAN Ltd. iv. What do the values computed in (a), (b) and (c) represent? c. Below are the details of Accounts Receivable of DORIAN Ltd. Customer Outstanding Balance GH¢ Days outstanding 1 5,000 28 2 8,000 42 3 15,000 30 4 8,500 65 5 6,000 120 6 14,000 73 7…arrow_forwardFast pls solve this question correctly in 5 min pls I will give u like for sure Surbh Question 2 Three part question Project L requires an initial outlay at t = 0 of $35,000, its expected cash inflows are $10,000 per year for 9 years, and its WACC is 12%. What is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent. $ Project L requires an initial outlay at t = 0 of $61,639, its expected cash inflows are $12,000 per year for 9 years, and its WACC is 9%. What is the project's IRR? Round your answer to two decimal places. % Project L requires an initial outlay at t = 0 of $71,000, its expected cash inflows are $9,000 per year for 9 years, and its WACC is 14%. What is the project's payback? Round your answer to two decimal places. yearsarrow_forward
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