Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two options.Compute the payback for both options. Begin by completing the payback schedule for Option 1 (refurbish).Year01235678Net Cash OutflowsAmount Invested$2,400,000Net Cash InflowsAnnualAccumulated$ 2,150,000 $280,000230,000180,000130,000130,000130,000130,0002,150,0002,430,0002,660,0002,840,0002,970,0003,100,0003,230,0003,360,000(Round your answer to one decimal place.)The payback for Option 1 (refurbish current machine) isyears.

The payback Period represents the period in which the initial cost of investment of a project is…

Answered: Requirement 1. Compute the payback, the…

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 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%.
2. You are evaluating an investment project with the following cash flows : Period Cash Flows - $200 000 1 $40 000 2 $60 000 3 $75 000 4 $ 80 000 Assuming the cost of capital 10%, calculate the following (in excel): Payback period Discounted Payback Period а. b. C. NPV d. PI е. IRR
Compute the Internal Rate of Return for a project with the following cash flows: Year Cash Flow 0 ($2,000) 1 $500 2 $400 3 $400 4 $1,500 Question 7 options: 7% 40% 12% 8%
Net Present Value Method, Internal Rate of Return Method, and Analysis for a Service Company The management of Advanced Alternative Power Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows: Biofuel Equipment Year 1 2 3 4 Year 1 2 The wind turbines require an investment of $513,900, while the biofuel equipment requires an investment of $1,093,320. No residual value is expected from either project. Present Value of an Annuity of $1 at Compound Interest 12% 0.893 1.690 2.402 3.037 3.605 3 4 5 Wind Turbines 6 7 8 9 10 Required: $180,000 180,000 180,000 180,000 6% 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 7.360 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 $360,000 360,000 360,000 360,000 5.759 6.145 4.111 4.564 4.968 5.328 5.650 15% 0.870 1.626 2.283 2.855 3.353 3.785 4.160 4.487 4.772 5.019 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 1a. Compute the net present value for each project. Use…
Question content area top Part 1 (Related to Checkpoint 6.6) (Present value of annuities and complex cash flows) You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: Investment Alternatives End of Year A B C 1 $ 14,000 $ 14,000 2 14,000 3 14,000 4 14,000 5 14,000 $ 14,000 6 14,000 70,000 7 14,000 8 14,000 9 14,000 10 14,000 14,000 (Click on the icon in order to copy its contents into a spreadsheet.) Assuming an annual discount rate of 15 percent, find the present value of each investment. Question content area bottom Part 1 a. What is the present value of investment A at an annual discount rate of 15 percent?…
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Assuming a 1-year, money market account investment at 2.282.28 percent (APY), a 1.391.39 percent inflation rate, a 2525 percent marginal tax bracket, and a constant $50 comma 00050,000 balance, calculate the after-tax rate of return, the real rate of return, and the total monetary return. What are the implications of this result for cash management decisions? Question content area bottom Part 1 Assuming a 1-year, money market account investment at 2.282.28% (APY), a 2525% marginal tax bracket, and a constant $ 50 comma 000$50,000 balance, the after-tax rate of return is 1.711.71%. (Round to two decimal places.) Part 2 Assuming a 1-year, money market account investment at 2.282.28% (APY), a 2525% marginal tax bracket, and a constant $ 50 comma 000$50,000 balance, the after-tax monetary return is $855855. (Round to the nearest dollar.) Part 3 Given an after-tax return of 1.711.71% and an inflation rate of 1.391.39%, the after-tax real rate…
N2. Account
1.4 The table represents the cash flows received from the investments at the end year. Each investment requires an initial investment of $1000. Answer the questions related to the two investment opportunities in the table below. Year 1 2 3 4 5 Investment A 225 215 250 225 205 Investment B 220 225 250 250 210 There are two approaches to evaluate this investment. Show the necessary calculations. • Assume the interest rate ot 4.33%. Use present value analysis to determine which investment you should choose? Calculating the rate of returns of the investment, which investment would you choose and why?
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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

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