Question 1Assuming that you have beeh appointed finance director of BPX Bhd. The company isconsidering investing in the production of an electronic device used in automobile. There aretwo mutually exclusive projects available to achieve the plan.Project IReturn in one year (RM)60,00060,000Project IIState of economy ProbabilityGood0.358,00062,000Moderate0.5Poor0.250,00048,000Project I or II would require an investment of RM50,000. The company has a current marketvalue of RM800,000. The estimated returns of the market in one year are: Good state 20%,Moderate state 15% and Poor state 10% respectively. Assume that the treasury bill rate as 9%.The research director projects that the company's share price will move in line with the market.Required (in no more than 1,000 words, show all relevant workings)(a) Calculatei market varianceii. systematic risk for Project Iiii. systematic risk for Project IIiv. covariance between Project I and the marketv. covariance between Project II and the market

Systematic risk, also known as undiversifiable risk or market risk, refers to the inherent…

Answered: Assuming that you have been appointed…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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.5ו Comparing Investment Criteria. onsiuer uie 1onOwing two inutuany exclusive projects: Cash Flow (B) 1TT Year Cash Flow (A) S415,000 -$3,500 49,000 1,920 57.000 1,390 74,000 1,420 530,000 1,050 4 Whichever project you choose, if any, you require a 13 percent return on your investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? 8If you apply the IRR criterion, which investment will you choose? Why2 d. If you apply the profitability index criterion, which investment will you choose? Why? e. Based on your answers in (a) through (d), which project will you finally choose? Why?
QUESTION 12 You invest $55 000 today into a project with a life of 4 years and which is expected to generate the following cash flows. Year 1. Cashflow 12 000 27 300 2 329 22 000 If you require to invest in projects with a payback period of 2.8 years or less, would this project be suitable? For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial 10pt 27C Rain showers I!! II
Q.5 Hiltoncorporation has three projects under consideration. The cash flow for each of them are shown in the following table. The firm has 16% cost of capital. The initial investment for all the projects is same ($40000). Cash inflows(CFt) Project B Project A Year 1 $13000 2 13000 3 13000 a. Calculate PBP for each project. b. write down your opinion in case of rejection or selection of the project. Project C $7000 10000 13000 $19000 16000 13000
answer e.g. 168 investments? 2. 2.1 2.2 2.3 2.4 Getum Ltd is considering investing in project Zeta. The following details relate to this project. Project Zeta R562 500 Initial investment Expected economic lifetime Minimum required rate of return Net annual cash inflows: Management Accounting Workbook 1st year 2nd year 3rd year 4th year 4 years 12% R180 000 R195 000 R210 000 R220 000 Required Calculate the following in respect of Project Zeta. The payback period (answer expressed in years, months and days) The net present value (NPV) (round off amounts to the nearest Rand) The internal rate of return (IRR) (answer correct to 2 decimal places) Refer to your calculations in question 2.2 and state whether Getum Ltd should invest in Project Zeta or not. Motivate your answer.
Question 4 The Janet Corporation is considering two mutually exclusive projects. The free cash flows associated with these projects are as follows: Project A Project BInitial investment -$50,000 -$50,000Cashflow year 1 15,625 0Cashflow year 2 15,625 0Cashflow year 3 15,625 0Cashflow year 4 15,625 0Cashflow year 5 15,625 100,000 The required rate of return on these projects is 10 percent.a. What is each project’s payback period?b. What is each project’s NPV ?c. What is each project’s IRR ?d. What has caused the ranking conflict?e. Which project should be accepted? Why?
Question 3 Simpson Ltd is an engineering company and is currently considering whether to accept one of the two mutually exclusive investment projects, namely project Bart and project Liza. The following are the Net Cash Flows of these two projects: Year Initial Investment 123 4 5 6 Project Bart £ (525,000) 260,000 (50,000) 302,000 240,000 194,000 125,000 Project Lisa £ (330,000) 80,000 162,000 180,000 145,000 81,000 a) Calculate the payback period for both projects and suggest which project (if any) is worthwhile if it is the company's policy not to take on a project with a payback period longer than 3 years. b) Briefly discuss the main reasons why, despite its numerous drawbacks, payback still remains a widely used technique for investment appraisal. c) Calculate the Net Present Value (NPV) for project Bart and project Lisa and recommend which project the company should invest in (if any), giving your reasons. The cost of capital 10%. d) You are told that at a cost of capital of 28%,…
Please give exact answer and excel steps Jeans LLC has a project with the following cash flows . Its required rate of return is 5 % , Year 012345 Cash Flow Project A -52,000.00 25,000.00 17,000.00 14,000.00 12,000.00 -3,000.00 What is the internal rate of retum ( IRR ) for this project ? options: a. 11.73859230479%b. 11.73962884992%c. 11.738592037872%d. 11.738591574995%e. 11.738592402818%f. 11.738672984783% Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
An investment of Public Transport need $ 200 billions, Revenue $ 100 billions / year, Expenditure for operational and maintenances $ 40 billions / year, Residual value at the end of year 10 th $ 60 billions, Bank Interest 12 % / yaer Calculate : a. NPV b. IRR с. В/C d. What do you think about the project ?
Question 1 Next Gen Corporation is considering two investment opportunities. The company can choose either to invest in Project K or Project M. The expected annual free cash flows for each project as follows: Year 0 1 2 3 4 5 Cash flows (RM) Project K Project M (7,000) (7,000) 1,800 (2,500) 1,800 4,800 0 0 0 0 3,800 10 000 If the required rate of return is 8%, calculate: 1. calculate the payback period for each project. 2. calculate the net present value for each project. 3. based on the two investment techniques, which project should be accepted?
Question #4 Iceland Corporation Limited is considering investing in one of two machines – A or B. The initial cost and net cash inflows from each project are shown below. The opportunity cost for both projects is 10% per cent. Cash Flow Machine A Machine B $ 2$ Initial Cost (6 000 000) (4 500 000) Net Cash Inflows 1 000 000 1 300 000 1 400 000 1 600 000 Year 1 Year 2 1 600 000 1 600 000 1 200 000 Year 3 2 300 000 1 200 000 1 200 000 Year 4 Year 5 Required: a) Calculate the ARR on initial capital for machine A and machine B. b) Calculate the ARR on average capital for machine A and machine B.
Question 3: Juhayna Food Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flow Project A Project B Project C Initial Investment 100000 120,000 130,000 Year 1 Cash Inflows 30000 36,500 38000 Year 2 cash inflows 35000 45000 20000 Year 3 cash inflows 40000 40000 42000 Year 4 cash inflows 38000 35000 45000 Year 5 cash inflows 20000 30000 50000 Taking into consideration that the cost of debt 7% , cost of preferred stock 12% and cost of new common stock 15%. The weight of each source of capital are long term debt 30% , preferred stock 20% and common stock equity 50%. Calculate the internal rate of return (IRR) for each project. Discuss any conflict in ranking that may exist between NPV and IRR. Summarize the preferences dictated by each measure, and indicate which…
Question 3: Juhayna Food Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flow Project A Project B Project C Initial Investment 100000 120,000 130,000 Year 1 Cash Inflows 30000 36,500 38000 Year 2 cash inflows 35000 45000 20000 Year 3 cash inflows 40000 40000 42000 Year 4 cash inflows 38000 35000 45000 Year 5 cash inflows 20000 30000 50000 Taking into consideration that the cost of debt 7% , cost of preferred stock 12% and cost of new common stock 15%. The weight of each source of capital are long term debt 30% , preferred stock 20% and common stock equity 50%. TO dO Create a spreadsheet to answer the following questions: Calculate the firm‘s cost of capital ( WACC) Calculate the payback period for each project. Calculate the net present value (NPV) of each…

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