(b)Nikita Berhad is evaluating a project which expected to earn a series of cashinflows as shown in the table below. The initial investment of this project isRM52,300.Cash Inflow (RM)12,50020,75035,02036,00037,50038,800Year23456If the required rate of return is 12 percent, determine whether this project isprofit or loss by applying the net present value and profitability indextechniques.

Net present value refers to the excess of the present value of cash inflows over the outflows. It is…

Answered: Nikita Berhad is evaluating a project…

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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Your company is considering a capital project that will require a net initial investment of $244,978. The project is expected to have a 7- year life and will generate an annual net cash inflow of $40,860. Using the present value tables, what is the internal rate of return? (Round answers to O decimal places, e.g. 25.) Click here to view the factor table. Internal Rate of Return %
Consider two investment projects, both of which require an upfront investment of $10 million and pay a constant positive amount each year for the next 12 years. Under what conditions can you rank these projects by comparing their IRRS? (Select the best choice below.) A. Ranking by IRR will work in this case so long as the projects' cash flows do not decrease from year to year. B. Ranking by IRR will work in this case so long as the projects' cash flows do not increase from year to year. C. Ranking by IRR will work in this case so long as the projects have the same risk. D. There are no conditions under which you can use the IRR to rank projects.
A project with the following cash flows received each year and with a required return of 8%. With the information given, compute:i. Discounted payback period ii. Net Present Value and iii. Profitability Index.
Calculate the:Net Present Value (NPV) of the investment and comment on the viability of the investment project. The annual incremental profits/ (losses) relating to the investment are estimated as follows: Years CF’s (000) Year 0 -175,000 Year 1 K11,000 Year 2 K3,000 Year 3 K34,000 Year 4 K47,000 Year 5 K8,000 Investment at the start of the project would be K175, 000,000.the investment sum assuming nil disposal value after five years, would be written off using the equal instalment method. The depreciation has been included in the profit estimates above, which should be assumed to arise at each year end. Assume the cost of Capital is 12% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 D.f 1.00 0.893 0.797 0.712 0.636 0.567
You are given the following cash flow information for a project. Given this information, and assuming that the correct risk-adjusted discount rate (WACC) to use is 14 percent, while the firm's true reinvestment rate is 23 percent, determine the modified net present value (MNPV) for this project. Year 0 1 2 3 4 5 O $20,408 O $22,162 O $21.277 $21,728 O$20,883 Cash Flow -$20,000.00 $16,000.00 $10,000.00 $15,000.00 $16,000.00 $17,000.00
The net cash flow per year for the investment projects A and B, is presented in the table below. Expected Net Cash Flow ($) Project 0 1 2 3 4 A -10,000 6500 3000 3000 1000 B -10,000 3500 3500 3500 3500 Calculate the NPV, IRR, PI, and PVR for the cash flows given in the following table. Assume the minimum acceptable rate of return of 8%. Which projects should be accepted if they are independent projects? Would the selection of the projects change if the cost of capital were 12%?
Given the following cash flows for project X and project Y, Year Project X Project Y 0 -55000 -100000 1 20000 15000 2 13500 17000 3 11000 19000 4 10000 25000 5 9000 30000 6 7500 35000 Calculate the NPV, IRR, MIRR and traditional payback period for each project, assuming a required rate of return of 7 percent If the projects are independent, which project(s) should be selected? If they are mutually exclusive, which project should be selected? (Answer in word form please)
Calculate/estimate the IRR(s) for a 6-year project with the following cash flows: CF0 = -50, CF1 =28 = CF2 = CF3 = CF4 = CF5, and CF6 = -93. In Excel, plot the NPV (= Y axis) against r (= discountrate), using r = 0%, 2%, and so on until you find all IRRs in the chart. Identify/estimate all IRRs.
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You are given the following information about the cash flows for Projects A and B: Project B $12,643.00 $6,264.00 $5.119.00 $4,284.00 $3,265.00 $2,884.00 Year 0 1 2 3 4 5 Given this information, and assuming a risk-adjusted discount rate of 14.0 percent for both projects, determine the internal rate of return (IRR) for the project with the highest net present value (NPV). 26.0818% 25.6301% 25.1784% Project A -$10,356.00 $2,185.00 $4,294.00 $4,642.00 $6,360.00 $3,125.00 O24.2750%
FB Company is considering investing in two construction projects, and he developed the following estimates of the cash flows. His required return is 10% and views these projects as equally risky. Year Project 1 cash flow project 2 cash flow 0 -550000 -700000 1 150000 200000 2 200000 150000 3 150000 250000 4 150000 150000 5 100000 150000 Required: a) Calculate the net present value (NPV) of each project, assess its acceptability, and indicate which project is best using NPV. b) Calculate the profitability index (PI) of each project, assess its acceptability, and indicate which project is best using PI. c) If both the projects have recorded a positive NPV value and the projects are mutually exclusive, which projects would you recommend for FB Company to undertake? Why?
Assuming you are facing with making a decision on a large capital investment proposal. the capital investment amount is $1000000,Estimated the study period is 5 years .The annual revenue at the end of each year is $100000and the estimated annual year-end expense is $900000 starting in year 2016, Assuming a market value at the end year is $ 3million and the benchmark rate is 10%, 1. Give the cash flow chart of the project

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