Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- An investment project costs $21,500 and has annual cash flows of $6,500 for 6 years. If the discount rate is 15 percent, what is the discounted payback period? Select one: a. 5.71 b. 3.91 c. 4.21 d. 4.91 e. 5.91arrow_forward2. You are considering two mutually exclusive projects with the following cash flows. The discount rate is 7.5 percent: YEAR PROJECT N PROJECT Y - P21,000,000 - P21,000,000 1 7,200,000 8,500,000 (a) Calculate the payback period of each project. ( (b) Compute the net present value of the two projects. (c) Which project should be accepted? Justify your answer. 2 4,900,000 5,200,000 9,100,000 4,900,000 4 6,100,000 8,700,000arrow_forwardProblem 6. Including loan The following investment alternatives are being evaluated. Assuming that there is only $30,000 available and the surplus will be acquired through a loan at 5.5% annual effective interest payable in annual payments over 4 years. Determine which alternative should be selected. Perform the analysis using the Present Value, Equivalent Annuity and IRR Methods. Use a MARR = 7% Year A B 0 -25000 -46000 1 7460 16640 2 7460 16640 3 7460 16640 4 6500 12600 5 6000 10600arrow_forward
- An investment project costs $12,600 and has annual cash flows of $3,100 for six years Required: (a) What is the discounted payback period if the discount rate is zero percent? (Click to select) (b) What is the discounted payback period if the discount rate is 3 percent? (Click to select) (c) What is the discounted payback period if the discount rate is 20 percent? (Click to select) eBook & Resources eBook: 9.3. The Discounted Paybackarrow_forwardPayback period. What are the payback periods of projects E and F in the following table: ? Assume all the cash flow is evenly spread throughout the year. If the cutoff period is 3 years, which project(s) do you ассept? ..... What is the payback period for project E? years (Round to one decimal place.)arrow_forward3) Consider the following two projects: Net Cash Flow Each Period Initial Outlay 1 2 3 4 Project A $4,000,000 $2,003,000 $2,003,000 $2,003,000 $2,003,000 Project B $4,000,000 0 0 0 $11,000,000 Calculate the net present value of each of the above projects, assuming a 14 percent discount rate. What is the internal rate of return for each of the above projects? Compare and explain the conflicting rankings of the NPVs and IRRs obtained in parts a and b above. If 14 percent is the required rate of return, and these projects are independent, what decision should be made? If 14 percent is the required rate of return, and the projects are mutually exclusive, what decision should be made?arrow_forward
- A new project will have an intial cost of $14,000. Cash flows from the project are expected to be $-4,000, $6,000, $8,000, and $12,000 over the next 4 years, respectively. Assuming a discount rate of 12%, what is the project's IRR? Question 5 options: 12.61% 13.14% 13.66% 13.93% 13.40%arrow_forwardBaghibenarrow_forwardis 22 percent? Future Value and Multiple Cash Flows Wells, Inc., has identified an investment project with the following cash flows. If the discount rate is 8 LO 1 3. percent, what is the future value of these cash flows in Year 4? What is the future value at an interest rate of 11 percent? At 24 percent? Year Cash Flow $ 865 1,040 1,290 1,385 1 2 3 4arrow_forward
- 8. A particular investment promises to make year-end annual payments in perpetuity. The first four annual payments will be $5. After that, future annual payments will grow at 5% per year forever. What is the present value of this investment if the discount rate is 10%? a. $98.68 b. $87.57 c. $76.46 d. $65.35 e. $54.24arrow_forward2arrow_forwardMendez Company has identified an investment project with the following cash flows. Year Cash Flow 1 $ 1,150 2 1,030 3 1,520 4 1,880 If the discount rate is 11 percent, what is the present value of these cash flows? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. What is the present value at 16 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. What is the present value at 22 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.arrow_forward
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