Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- 1. A project has an initial cost of 40,000. The future cash flows are 5,500, 15,200, -3,600, and 32,000 for year 1 to 4 respectively. How many IRRs will this project have? a. 3 b. 1 c. 4 d. 0arrow_forwardAn investment project provides cash inflows of $950 per year for eight years. a. What is the project payback period if the initial cost is $3,450? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the project payback period if the initial cost is $4,500? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. What is the project payback period if the initial cost is $8,600? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)arrow_forwardA project costing $230,000 has a Net Present Value (NPV) of -$24,400. Which one of the following statements is correct? a. The Present Value of future cash flows equals -$24,400 b. The Present Value of future cash flows equals $254,400. c. The Present Value of future cash flows equals $205,600. d. The Present Value of future cash flows equals -$254,400.arrow_forward
- What is the minimum cash flow that could be received at the end of year 3 to make the following project "acceptable"? Initial cost = $100,000; cash flows at end of years 1 and 2 = $35,000; opportunity cost of capital = 8% a) $39,256.2 b) $47,347.2 c) $29,494.5 d) $37,250.5arrow_forwardAn investment project provides cash inflows of $740 per year for 9 years. What is the project payback period if the initial cost is $1,480? A. 2.00 years B. 2.02 years C. 1.90 years D. 1.94 years E. 2.04 years What is the project payback period if the initial cost is $4,958? A. 6.70 years B. 6.77 years C. 6.37 years D. 6.83 years E. 6.50 years What is the project payback period if the initial cost is $7,400? A. 3.01 years B. Never C. 4.95 years D. 5.25 years E. 1.35 yearsarrow_forwardHere are cash flows for a project under consideration. C(0)= -$8160, C(1)=6180, and C(2)=20280. What is the IRR of the project?arrow_forward
- Assume a project has the following expected cash flows: What is the payback period? Year 0 1 2 3 4 Expected Net Cash Flow ($400,000) 100,000 150,000 200,000 250,000arrow_forwardCarland, Incorporated, has a project available with the following cash flows. If the required return for the project is 7.9 percent, what is the project's NPV? Year Cash Flow 0 -$ 258,000 1 66, 300 2 90, 400 3 117,800 4 70,900 5-12,000 $35, 378.61 $18, 968.78 $27, 173.69 $15, 173.69 $13,276.98arrow_forwardProject A would cost $47,027.00 today and have the following other expected cash flows: $27,934.00 in 1 year, $19,189.00 in 2 years, $4,818.00 in 3 years, and $3,140.00 in 4 years. The cost of capital for project A is 11.44 percent. Project B would cost $97,253.00 today and have the following other expected cash flows $56,053.00 in 1 year, $24,308.00 in 2 years, $26,936.00 in 3 years, and $2,980.00 in 4 years. The cost of capital for project B is 7.68 percent Statement 1: Project A would be accepted based on the project's internal rate of return (IRR) and the IRR rule Statement 2: Project B would be accepted based on the project's payback period and the payback rule if the payback threshold is 2.58 years Statement 1 is false and statement 2 is false 0000 Statement 1 is true and statement 2 is false Statement 1 is false and statement 2 is true Statement 1 is true and statement 2 is truearrow_forward
- You are given the following cash flows for a project. Assuming a cost of capital of 12.84 percent. determine the profitability index for this project. Year 0 1 2 3 4 5 O 14981 O 1.68/7 O1.7508 1.6245 1.5613 Cash Flow -$1,115.00 $554.00 $622.00 $648 00 $426.00 $216.00arrow_forwardFor project A, the cash flow effect from the change in net working capital is expected to be $490.00 at time 2 and the level of net working capital is expected to be $750.00 at time 1. What is the level of current assets for project A expected to be at time 2 if the level of current liabilities for project A is expected to be $2,600.00 at time 2? $2,860.00 (plus or minus $10) $3,840.00 (plus or minus $10) $1,360.00 (plus or minus $10) $2,340.00 (plus or minus $10) None of the above is within $10 of the correct answerarrow_forwardConsider the following project balances for a typical investment project with athe service life of five years: (a) Fill in the blanks by constructing the original cash flows of the project anddetermining the terminal balance.(b) Determine the interest rate used in the project-balance calculation, andcompute the present worth of this project at the computed interest rate.arrow_forward
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