Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 14 percent. Project A: Project B: Nagano NP-30. Professional clubs that will take an initial investment of $580,000 at Year 0. For each of the next 5 years, (Years 1-5), sales will generate a consistent cash flow of $215,000 per year. Year 0 Introduction of new product at Year 6 will terminate further cash flows from this project. Nagano NX-20. High-end amateur clubs that will take an initial investment of $440,000 at Year 0. Cash flow at Year 1 is $130,000. In each subsequent year, cash flow will grow at 10 percent per year. Introduction of new product at Year 6 will terminate further cash flows from this project. NP-30 -$580,000-$440,000 NX-20 1 215,000 130,000 234 215,000 143,000 215,000 157,300 215,000 173,030 5 215,000 190,333 Complete the following table: (Do not round intermediate calculations. Round your "PI" answers to 3 decimal places, e.g., 32.161, and other answers to 2 decimal places, e.g., 32.16. Enter your IRR answers as a percent.) NP-30 NX-20 Payback IRR years % years % PI NPV

Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 14 percent. Project A: Project B: Nagano NP-30. Professional clubs that will take an initial investment of $580,000 at Year 0. For each of the next 5 years, (Years 1-5), sales will generate a consistent cash flow of $215,000 per year. Year 0 Introduction of new product at Year 6 will terminate further cash flows from this project. Nagano NX-20. High-end amateur clubs that will take an initial investment of $440,000 at Year 0. Cash flow at Year 1 is $130,000. In each subsequent year, cash flow will grow at 10 percent per year. Introduction of new product at Year 6 will terminate further cash flows from this project. NP-30 -$580,000-$440,000 NX-20 1 215,000 130,000 234 215,000 143,000 215,000 157,300 215,000 173,030 5 215,000 190,333 Complete the following table: (Do not round intermediate calculations. Round your "PI" answers to 3 decimal places, e.g., 32.161, and other answers to 2 decimal places, e.g., 32.16. Enter your IRR answers as a percent.) NP-30 NX-20 Payback IRR years % years % PI NPV

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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A firm in New York has USD 40 000 to invest in three projects, either Project A or Project Bor Project C. Each project runs over four years. The expected cash inflows at the end of eachyear are displayed in the table The required rate of return (discount rate) is 10% p.a.What conclusions can you draw? Are the projects equally profitable? Use the profitability index(PI).
Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for Nagano Golf is 17 percent Project A: Nagano NP-30. Professional clubs that will take an initial investment of $995,000 at time 0. Next five years (years 1-5) of sales will generate a consistent cash flow of $452,000 per year. Introduction of new product at year 6 will terminate further cash flows from this project. Project B. Nagano NX-20. High-end amateur clubs that will take an initial Investment of $730,000 at time 0. Cash flow at year 1 is $300,000. In each subsequent year, cash flow will grow at 10 percent per year. Introduction of new product at year 6 will terminate further cash flows from this project. Year SAWNTO 1 2 3 4 5 NP-30 -$995,000 452,000 452,000 452,000 452,000 452,000 NX-20 -$730,000 300,000 330,000 363,000 399, 300 439, 230 Complete the following table: (Do not round intermediate calculations. Round the "PI" answers to 3 decimal places and…
1. Determine which of the two (2) investment projecta your supervisor ahould choose, given a diacount rate of 10% from J P Morgan Chase bank. The first project generates a profit of USS 100,000 in four (4) years, while the second, a profit of US$ 75,000 in six yeara. NPV 1 = 100000 (1/1.1^4 + 1/1.1^3 + 1/1.1^2+ 1/1.1) = $316986.55 NPV 2 = 75000 (1+/1.1^6 + 1/1.1^5 + 1/1.1^4 + 1/1.1^3 + 1/1.1^2 + 1/1.1) =$326644.55 The second investment 11 What ia the discount rate or proxy of the diacount rate that ahould be uaed? 1.2 Determine the optimal inveatment project at the given diacount rate? 1.3 Suppose the diacount rate at Bank of America, ia 7.5%, which project ahould be chozen.
Robust Ventures is planning to expand its production operation. It has identified three different technologies for meeting the goal. The initial investment and annual revenues with respect to each of the technologies are summarized in table below. Annual Revenue Initial Life Investment (years) (Php) (Php) Technology X 1,200,000 400,000 10 Technology Y 2,000,000 600,000 10 Technology Z 1,800,000 500,000 10 Assuming 20% interest rate, compounded annually, find the future worth of Technology Y. a. Php 25 million O b. Php l15 million O c. Php 35 million d. Php 20 million
Robust Ventures is planning to expand its production operation. It has identified three different technologies for meeting the goal. The initial investment and annual revenues with respect to each of the technologies are summarized in table below. Initial Annual Life Investment Revenue (years) (Php) (Php) Technology X 1,200,000 400,000 10 Technology Y 2,000,000 600,000 Technology Z 1,800,000 500,000 10 Assuming 20% interest rate, compounded annually, find the future worth of Technology Z. 10
Robust Ventures is planning to expand its production operation. It has identified three different technologies for meeting the goal. The initial investment and annual revenues with respect to each of the technologies are summarized in table below. Suggest the best technology which is to be implemented based on the future worth method of comparison assuming 20% interest rate, compounded annually. Annual Revenue (Php) Initial Life Investment (years) (Php) Technology X 1,200,000 400,000 10 Technology Y 2,000,000 600,000 10 Technology Z 1,800,000 500,000 a. Technology X since it has the highest revenue. O b. Technology X since it is the least costly. c. Technology Z since it has the highest revenue. O d. Technology Y since it has the highest revenue. 10
Robust Ventures is planning to expand its production operation. It has identified three different technologies for meeting the goal. The initial investment and annual revenues with respect to each of the technologies are summarized in table below. Initial Investment Annual Revenue Life (years) (Php) (Php) Technology X 1,200,000 400,000 10 Technology Y 2,000,000 600,000 10 Technology Z 1,800,000 500,000 10 Assuming 20% interest rate, compounded annually, find the future worth of Technology Z. O a. Php 24 million O b. Php 42 million c. Php 30 million d. Php 20 million
Robust Ventures is planning to expand its production operation. It has identified three different technologies for meeting the goal. The initial investment and annual revenues with respect to each of the technologies are summarized in table below. Initial Investment Annual Revenue Life (years) (Php) (Php) Technology X 1,200,000 400,000 10 Technology Y 2,000,000 600,000 10 Technology Z 1,800,000 500,000 10 Assuming 20% interest rate, compounded annually, find the future worth of Technology Y.
Emerald Enterprises is developing a new product at the cost of $ 50,000. The new product is expected to increase the cash flow for the next five years as follows: $ 10000, $ 15000, $ 15000, $ 20000 and $ 20000. If the discounting rate is 12%, what is the IRR of the project? Note: Use EXCEL function “=IRR(Cash Flow Range)” 18.54% 15.96% 12.43% - 2.48%
2. Your firm is considering investing in one of two mutually exclusive projects. Project A requires an initial outlay of $3,500 with expected future cash flows of $2,000 per year for the next three years. Project B requires an initial outlay of $2,500 with expected future cash flows of $1,500 per year for the next two years. The appropriate discount rate for your firm is 12%. Draw the timeline of two chain cycles for project A. Compute the NPV of the two chain cycles for project A. b. а. Draw the timeline of three chain cycles for project B. Compute the NPV of the three chain cycles for project B. Which project would you recommend? с.
You are considering investment in the following projects. Assume that your discount rate is 12% per year for both projects. Project A’s cash flows Year 0 Year 1 Year 2 Year 3 Year 4 -$12,000 $7,000 $3,000 $2,000 $1,500 Project B’s cash flows Year 0 Year 1 Year 2 Year 3 Year 4 -$11,000 $6,000 $2,500 $1,500 $1,200 (d) Now suppose that your discount rate is 5% per year for both projects. If projects A and B are mutually exclusive which project will you accept, if any? (e) Calculate Payback Period for project A and Payback Period for project B. (f) Suppose that the payback cutoff for both projects is 3.5 years, which project (if any) should be accepted using payback periods rule? (Disregard NPV and IRR rules in answering this question)
Can you show me how this is done? Emily Company has a minimum required rate of return of 9%. It is considering investing in a project that costs $90,671 and is expected to generate cash inflows of $23,576 at the end of each year for three years. The profitability index for this project is Round your answer to 2 decimal places. Selected Answer: 65 Correct Answer: 0.66 ± 0.05

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