Project B's initial outlay is RM1,800,000 excluding the purchase of fixed asset of RM250,000. The cash flows are RM440,000 in year one, RM1,000,000 in year two, RM560,000 in year three, RM450,000 in year four and the final year is RM200,000. At the termination of the project, 50% of the fixed asset value can be recovered. Assume cost of project of 6.23%. The initial outlay is RM The total present value is RM_ project's Pl The terminal value is RM The project's PP is period. The project's DPP is Total future value is RM The project's IRR is %. The project's MIRR is period. The project's NPV RM .. The %. The project's EAA is RM Based on EAA, the company should accept project B as the total will be more. True False Overall assessment based on Capital Budgeting Techniques, Project B should accepted. True False

Project B's initial outlay is RM1,800,000 excluding the purchase of fixed asset of RM250,000. The cash flows are RM440,000 in year one, RM1,000,000 in year two, RM560,000 in year three, RM450,000 in year four and the final year is RM200,000. At the termination of the project, 50% of the fixed asset value can be recovered. Assume cost of project of 6.23%. The initial outlay is RM The total present value is RM_ project's Pl The terminal value is RM The project's PP is period. The project's DPP is Total future value is RM The project's IRR is %. The project's MIRR is period. The project's NPV RM .. The %. The project's EAA is RM Based on EAA, the company should accept project B as the total will be more. True False Overall assessment based on Capital Budgeting Techniques, Project B should accepted. True False

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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Kayeu Ltd is evaluating the investment in two new projects X and Y which would generate the following expected net cashflows: Project X Project Y Year 1 320 000 190 000 Year 2 300 000 280 000 Year 3 280 000 290 000 Year 4 240 000 300 000 Year 5 200 000 320 000 Details of the initial invesment for the two projects X and Y are : $950 000 and $1 250 000 with life of 5 years each. Residual value for project X is $150 000 and for Project Y $250 000 The company has a cost of capital of 12% per annum. Discount factors Year 1 0.893 Year 2 0.797 Year 3 0.712 Year 4 0.636 Year 5 0.566 Required (a) Assume that each project will sell for its residual value at the end of five years evaluate each project using each of the following methods: (i) Payback (ii) Accounting rate of return (iii) Net present value (b) based upon your calculation above in (a) advise management which project should be picked.
The investment required for a project is estimated at OMR 38,000. The cash flows expected from the project are: Year 1 OMR 18,000, Year 2 OMR 22,000 and Year 3 OMR 17,000. In this case, the Payback period of the project is: a. 2.09 years b. 1.45 years c. 1.91 years d. 1.64 years
Consider two mutually exclusive projects – Project X and Project Y with identical initial outlays of RM90,000 and depreciable lives of 5 years. Project X is expected to produce free cash flows of RM32,787 each year. Project Y is expected to generate a single after-tax net cash flow of RM223,880 in year 5. The cost of capital is 15 percent. Required:(a) Calculate the net present value for each project
Consider two mutually exclusive projects – Project X and Project Y with identical initial outlays of RM90,000 and depreciable lives of 5 years. Project X is expected to produce free cash flows of RM32,787 each year. Project Y is expected to generate a single after-tax net cash flow of RM223,880 in year 5. The cost of capital is 15 percent. Required:(a) Calculate the net present value for each project (b) Determine the internal rate of return for each project.(c) Compute the payback period for each project. (d) In a situation where there is capital rationing, calculate the profitability index (PI) for both projects and rank them accordingly. Based on your PI calculations above, identify the problems you foresee in selecting one of the projects. Select the best project based on Capital Budgeting Valuation Techniques above.
A project has an initial requirement of $261,000 for fixed assets and $27,000 for net working capital. The fixed assets will be depreciated to a zero book value over the four-year life of the project and have an estimated salvage value of $78,000. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $96,200 and the discount rate is 12.75 percent. What is the project's net present value if the tax rate is 30 percent?
A project will produce an operating cash flow of $18,000 a year for 8 years. The initial fixed asset investment in the project will be $75,000. The net aftertax salvage value is estimated at $11,250 and will be received during the last year of the project's life. What is the IRR? A. 18.57% B. 16.71% C. 17.08% D. 18.94% E. 17.83%
A project will produce an operating cash flow of $7,500 a year for 8 years. The initial fixed asset investment in the project will be $35,000. The net aftertax salvage value is estimated at $3,500 and will be received during the last year of the project's life. What is the IRR?
The cash flows for a project are £3,000 in Year 1, £5,000 for Year 2, and £4,000 in Year 3. The project pays back for itself in 2.5 years. The initial cost of the project was: a) £10,000 b) £8,000 c) £12,000 d) £11,000
The cost of a project is Rs. 32,400. It is expected to generate cash inflows of Rs.16, 000, Rs. 14,000 and Rs.12, 000 through a three-year life period . Calculate the Internal rate of Return of the project
Consider two mutually exclusive projects – Project X and Project Y with identical initial outlays of RM90,000 and depreciable lives of 5 years. Project X is expected to produce free cash flows of RM32,787 each year. Project Y is expected to generate a single after-tax net cash flow of RM223,880 in year 5. The cost of capital is 15 percent.Required:(c) Compute the payback period for each project.
Calculate the capitalized cost of a project that has an initial cost of Php 3,000,000 and an additional investment cost of Php 1,000,000 at the end of every 10 years. The annual operating cost will be Php 100,000 at the end of every year for the first four years and Php 160,000 thereafter. In addition there is expected to be recurring major rework cost of P300,000 every 13 years. Assume i= 15%.
ABC Ltd. is considering an investment which would require the immediate purchase of a capital asset costing €400,000 and working capital of €120,000. Net inflows will be €180,000, €160,000 and €140,000 for year one, year two and year three. Working capital will increase by 20% per year in each of the first two years. All of the working capital will be turned into cash at the end of year three. The company’s cost of capital is 15%. The NPV of the investment (ignoring taxation), to the nearest whole number, is:

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