- Initial investment = $3,905,000 Expense = $5, 580,000 (first year) - Income = $6,480,000 (first year) develop a forecasted 10 years - cash flow in excel in order to find - payback period - NPV Use a minimum expected return rate 10%, inflation rate 3%, and tax rate 20% . Give comments on your analysis result and recommendation on this investment

- Initial investment = $3,905,000 Expense = $5, 580,000 (first year) - Income = $6,480,000 (first year) develop a forecasted 10 years - cash flow in excel in order to find - payback period - NPV Use a minimum expected return rate 10%, inflation rate 3%, and tax rate 20% . Give comments on your analysis result and recommendation on this investment

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

See similar textbooks

Similar questions

XYZ Corporation is considering a capital budgeting project and requires a detailed analysis. The company has provided youwith the following financial information and ratios:Return on Investment (ROI): 15%Payback Period: 3 yearsNet Present Value (NPV): R50,000Internal Rate of Return (IRR): 12%Cash Flows:Year 1: R20 000Year 2: R30 000Year 3: R40 0001.4 Calculate the ARR for XYZ Corporation. Assume depreciation is calculated on the straight-linemethod and that the project has a scrap value of R5000
The Potential for Multiple IRRs A proposed investment has the following projected after-taxcash flows over its 3-year life:Initial outlay (time 0) = ($1,000)End of year 1 = $2,000End of year 2 = $2,000End of year 3 = ($3,700) Required 1. In a capital budgeting context, explain the difference between a normal and a non-normal cash flowpattern. What is the importance of this distinction for estimating the internal rate of return (IRR) of aproposed investment? 2. For the proposed investment project just described, how many IRRs will there be? Why?3. Use Excel to prepare a graph of the net present value (NPV) profile of the proposed investment describedherein. On the X-axis, show discount rates from 0% to 120%, in increments of 5%. On the Y-axis, showthe estimated NPV of the project for each of the specified discount rates. (Use the built-in NPV functionin Excel to estimate the NPVs.) Based on a visual examination of the graph, what are the two estimatedIRRs for the proposed investment? 4.…
based on information on the image attached, Calculate the initial investment required for the project and then Discuss the significance of each ratio in evaluating the project.
Cash payback period, net present value method, and analysis Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: Each project requires an investment of $900,000. A rate of 15% has been selected for the net present value analysis. Instructions 1. Compute the following for each product: a. Cash payback period. b. The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2). 2. Prepare a brief report advising management on the relative merits of each project.
Make a CashFlow projection of 10 million rupees investiment in some project ABC for the next 7 years. Recall following topics you have covered in your course: i) Capital Budgeting Techniques ii) Cash flow Estination. Apply all the techniques on your cash flow projections for decision making Assume required rate of return is 15% . Capital Budgeting Techniques: Payback Period. Discounted Payback Period Net Present Value . Internal Rate of Return Modified Internal Rate of Return Average Accounting Return
Consider an investment project, which behaves according to the cash flow (in local currency) below, as well as the respective inflations for the period. In view of the above and knowing that the capital cost of the project is 15% per year, it is requested: a) The values of NPV and IRR b) A graphical sketch of NPVs versus interest rates c) Decision on the feasibility of the project regarding the IRR and NPV indicators Anos = years Fluxo de caixa = cash flow Taxa de inflação do período = period inflation rate
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 35 and 45 years, respectively. Time: Cash flow: 2 4 -$5,100 $1,280 $2,48e $1, 680 $1,680 $1,489 $1, 250 Use the NPV decision rule to evaluate this project. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) NPV
Explain well with step by step type the answer.
Profitability index. Given the discount rate and the future cash flow of each project listed in the following table, . use the Pl to determine which projects the company should accept. What is the Pl of project A? i Data Table (Round to two decimal places.) (Click on the following icon o in order to copy its contents into a spreadsheet.) Cash Flow Project A -%241,900,000 $150,000 $350,000 Project B Year 0 $2,300,000 $1,150,000 $950 000 $750,000 $550,000 Year 1 Year 2 Year 3 $550,000 Year 4 $750,000 $950,000 4% Year 5 $350.000 Discount rate 18% Print Done
The HUT is evaluating a 5 year investment projected to yield the following relevant cash flows over its 5 year life: Given that the firm employs a 12% discount rate, what is the value of each of the three criteria: NPV? Profitability Index? Payback Period? V
Accounting Draw the cash flow diagram for the given project below and then calculate the project net profit. The following table shows the activities description, dependency, duration, and cost elements. Assume the followings: Project overhead 8%. Tax 3%. Bond 1.25%. Profit 6%. Interest rate 9% per year. Down payment 10% with a guarantee letter, which costs 0.25% per month paid to the bank at the project start date. A performance guarantee letter of 10% will be submitted from contractor at the project begin. Invoices are submitted every month and will be paid a month later. Retention 10% and will be paid at the last invoice. Subcontractors: retention 10% will be paid at the last invoice, down payment 20%. Labor: labor expenses to be paid bi-weekly. Equipment: equipment expenses
You have found an investment opportunity that will provide annual cash flows of $1,234 for 5 years and costs $6789 today. If the required return is 12%, what is the profitability index for this opportunity?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS