QUESTION 5 A company is thinking about marketing a new product. Up-front costs to market and develop the product are $14.56 Million. The product is expected to generate profits of $1.39 million per year for 26 years. The company will have to provide product support expected to cost $294051 per year in perpetuity. Furthermore, the company expects to invest $40821 per year for 11 years for renovations on the product. This investing would start at the end of year 7. Assume all profits and expenses occur at the end of the year. Calculate the NPV of this project if the interest rate is 7.45%. NOTE: Answer in $. If your answer is 220M, you must answer 220000000.0000. HINT. Compute the present value of all cash flows and then combine them.

QUESTION 5 A company is thinking about marketing a new product. Up-front costs to market and develop the product are $14.56 Million. The product is expected to generate profits of $1.39 million per year for 26 years. The company will have to provide product support expected to cost $294051 per year in perpetuity. Furthermore, the company expects to invest $40821 per year for 11 years for renovations on the product. This investing would start at the end of year 7. Assume all profits and expenses occur at the end of the year. Calculate the NPV of this project if the interest rate is 7.45%. NOTE: Answer in $. If your answer is 220M, you must answer 220000000.0000. HINT. Compute the present value of all cash flows and then combine them.

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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A 150.
5
Problem 1: An investment in some rental property in Jubail is worth $12,000 with 10% residual value at the end of 10 years. Based on the data gathered relating to this investment (refer to the table below), the rental revenue will increase each year, but so will the maintenance expenses. If your MARR=12% per year and expect to recover the initial cost in not more than 3 years with an annual profit of not less than $900, do you accept or reject this investment opportunity? Justify your decision. Year Revenue 6,000 6,200 6,300 6,400 6,500 6,600 6,700 6,800 6,900 8,200 Expenses 12,000 3,100 3,300 3,500 3,700 3,900 6,100 4,300 4,500 4,700 4,900 1 2 3 4 5 6. 7 8 9. 10
7. A company is considering purchasing equipment for a new product line. The initial investment is R1,500,000. The equipment needs an upgrade after 5 years, this will cost another R750,000. The incremental cashflows for the next 10 years will be R500,000 per year, starting from the end of the first year. The investment period is 10 years. The company's WACC is 12%. Calculate the NPV and the MIRR for the project. Should the company invest in the equipment?
n * A manufacturer of video games develops a new game over two years. This costs $840,000 per year with one payment made immediately and the other at the end of two years. When the game is released, it is expected to make $1.50 million per year for three years after that. What is the net present value (NPV) of this decision if the cost of capital is 8%? OA $2,806,405 OB. $3,332.606 OC. $1,929,404 OD. $1,754,003
24. You are evaluating a project that will cost $534,000, but is expected to produce cash flows of $128,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is ____years. b. If you want to increase the value of the company you (will/will not) take the project since the NPV is (negative/positive) **round to two decimal places**
11. I need help with finance home work question A company is considering a 7-year project. At the beginning of the project, a cash outflow in the amount of $340,000 would be required. The company expects the project would generate cash inflows in the amount of $70,000 at the end of each of the project's 7 years. Assume the company requires a return of 8%. What NPV does the company expect for this project?
Correct Answer Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $343,762 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,760,000. The cost of the machine will decline by $110,000 per year until it reaches $1,320,000, where it will remain. The required return is 16%. What is the value of the option to wait 2 years to purchases the machine? (Round answer to 2 decimal places. Do not round intermediate calculations) 63,711.41 margin of error +/- 0.02
Question 2 A firm is considering an investment project that has a cost of $1 million and is expected to generate an annual after-tax cash flow of $250,000 for five years. It has already spent $25,000 in research and development (R&D) costs for the project. If the firm's required rate of return is 14 percent and consider R&D a sunck cost, what is the NPV of this project? A $25,000 B -$141,750 C +141,750 D $858,250
#27 * Finding the Internal Rate of Return (IRR) of an Investment: A company is considering buying a new piece of machinery that costs $8M and has a salvage value of $1.5M at the end of its 10-year useful life. The machinery nets $2.3M per year in annual revenues. MARR = 10%. The internal rate of return (IRR) on this investment is approximately _____________. A. 26% B. 31% C. 19% D. 16%
10. The company Time has just completed the development of a smart watch. This new product is expected to produce annual revenues (constant) of 450.000€ and operating costs (constant) of 310.000€ starting from year 1. To realize the new product, an investment in a new equipment was required. The investment occurred at year 0, its value was of 680.000€ (immediately paid in cash at year 0) and the equipment is expected to be sold at the end of year 5 at 60.000€. The projected life cycle of the smart watch is of 5 years. The 60% of the investment is financed with equity capital (ke:8%), while the remaining part with third parties capital at a cost of 6%. By adopting an invested capital logic: O NPV: + 80.213 € ONPV: -80.213€ NPV: -66.652 € O NPV: 0 €
Intro You are evaluating an investment project costing $49,000 initially. The project will provide $3,000 in after-tax cash flows in the first year, $4,000 in the second year and $7,000 each year thereafter for 10 years. The maximum payback period for your company is 9 years. Part 1 What is the payback period for this project? 0+ decimals Submit Part 2 Should your company accept this project? Yes No Submit

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