(Related to Checkpoint 11.1 and Checkpoint 11.4) (Calculating NPV, PI, and IRR) Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $10,100,000, and the project would generate cash flows of $1,340,000 per year for 20 years. The appropriate discount rate is 10.5 percent. a. Calculate the NPV. b. Calculate the Pl. c. Calculate the IRR. d. Should this project be accepted? Why or why not? a. The NPV of the expansion is $ (Round to the nearest dollar.)

(Related to Checkpoint 11.1 and Checkpoint 11.4) (Calculating NPV, PI, and IRR) Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $10,100,000, and the project would generate cash flows of $1,340,000 per year for 20 years. The appropriate discount rate is 10.5 percent. a. Calculate the NPV. b. Calculate the Pl. c. Calculate the IRR. d. Should this project be accepted? Why or why not? a. The NPV of the expansion is $ (Round to the nearest dollar.)

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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Aurum, Inc. is considering the purchase of new mining equipment. The equipment will cost $1,500,000 and will produce an incremental cash flow of $400,000 per year over its five-year life. The disposal value is expected to be $20,000. The company has a required rate of return of 10%. What is the NPV of the project?
Garfield Inc is considering a new project that requires an initial investment of $37,700 and will generate a net income of $5,331 per year, if the project’s profitability index is 1.8, What is the present value of the project’s future cash flows. Round to the nearest dollar.
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What is The net present value of the project (Round to three decimal places.)
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A project requires an initial investment of $225,000 and is expected to generate the following net cash inflows: Year 1: $95,000 Year 2: $80,000 Year 3: $60,000 Year 4: $55,000 Required: Compute net present value of the project if the minimum desired rate of return is 12%. Calculate the following: Payback Period NPV IRR
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.
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