Problem 5-29 Calculating Incremental Cash FlowsDarin Clay, the CFO of MakeMoney.com, has to decide between the following twoprojects:YearProjectMillionProject Billion0123-$2,5000-290-$100+1,0501.0901.8501,8502,900The expected rate of return for either of the two projects is 13 percent. What is the rangeof initial investment (0) for which Project Billion is more financially attractive than ProjectMillion? (Do not round intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)Initial investment less than

We can analyze the project using Net Present Value (NPV) which is the sum of the discounted cash…

Answered: Problem 5-29 Calculating Incremental…

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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Problem 6. Justine Global Info Tech records the following cash flows at the end of each year for a project. If the firm's discount rate is 11%, what is the PRESENT VALUE of the project? Year Cash Flow 1 P794,633.00 P542,149.00 P836,200.00 P716,080.00 P520,354.00 2 3 4 5
You are asked to evaluate an investment project with the following cash flows: Year 1 234. 2 4 Cash Flow $800 1,090 1,350 1,475 a. If the discount rate is 7 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 17 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value at 7% b. Present value at 17% c. Present value at 25% $ 3,926.98
Q. 2 Using Microsoft Excel, create an investment cash-flow diagram that will have a present worth of zero using MARR = 12%. The study period needs to be exactly 2 years and each year should have at least one unique cash-flow that is different from the cash-flows over the other years. Your answer should contain a table showing the cash-flows for each year and a graphical representation of the cash-flows (cash-flow diagram).
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 17 The net cash flows for two projects, A and B, are as follows: Year o 3 -220000 -5000 122000 130000 -60000 -10000 -120000 200000 1 2 A Given a discount rate of 4.5%: Blank 1: Calculate the net present value of project A. Blank 2: Estimate the IRR of project A. Write your answer as a percent %. If your answer has a decimal, round to 2 places. Blank # 1 Blank # 2
Problem 7: NPV versus IRR. Consider the following two mutually exclusive projects: Year Cash flow Cash flow (X) (Y) O 1 2 3 -9500 5800 4000 4000 PART 7A: The NPV for X is $ Answer: 2083.77 -9500 3500 5000 6000 if the required rate of return is 10%.
4.11 Present Value and Multiple Cash Flows Specter Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value at 18 percent? At 24%? Year Cash Flow $795 945 1325 1,860
What is the true IRR of the following project? Assume the firm would be able to reinvest the cash flows at a 7% rate of return. Year A O 1 2 3 a. 14.85% b. 15.32% C. Question 27 Select one: 14.21% d. -1,000 14.00% 600 400 400
Problem 1 Using Microsoft Excel, create an investment cash-flow diagram that will have a present worth of zero using MARR = 12%. The study period needs to be exactly 9 years and each year should have at least one unique cash-flow that is different from the cash-flows over the other years. Your answer should contain a table showing the cash-flows for each year and a graphical representation of the cash-flows (cash-flow diagram).
What is the present value of an investment with the following cash flows? Year 1 $14,000 Year 2 $20, 000 Year 3 $30,000 Year 4. $ 43,000 Year 5. $ 57,000 Use a 7% discount rate, and round your answer to the nearest $1. a. $128, 487 b. $107, 328 c. $112, 346 d. $ 153, 272
For the given cash flows, suppose the firm uses the NPV decision rule. Year 0 1 3 Cash Flow -$ 154,000 62,000 77,000 61,000 a. At a required return of 8 percent, what is the NPV of the project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. At a required return of 20 percent, what is the NPV of the project? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. NPV b. NPV
Two mutually exclusive investment projects have the following forecasted cash flows: Year A B 0 -$20,000 -$20,000 1 +11,000 0 2 +11,000 0 3 +11,000 0 4 +11,000 +55,000 Use Table II and Table IV to answer the questions. Compute the internal rate of return for each project. Round your answers to one decimal place.IRRA: % IRRB: % Compute the net present value for each project if the firm has a 10 percent cost of capital. Round your answers to the nearest dollar.NPVA: $ NPVB: $ Which project should be adopted? Why? should be chosen because it has the higher . It is assumed that the firm's reinvestment opportunities are more accurately represented by the .

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