Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- The firm invests $1,000 today, and realizes after tax cashflows in the amounts of $110, $660, and $880 at the ends of years 1-3, respectively. WACC=10%. Find
NPV .
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- An apartment property that will be held for 10 years has the following forecasted cash flows before taxes: 1 2 3 4 $ 5 2,760 2,720 2,686 2,659 2,636 $13,387 $23,199 $88,400 EOP $90,500 6 7 8 9 10 2,581 It is expected that the end of year 10 sales proceeds before taxes will be $39,697. How much initial investment can an equity investor pay for the equity portion if the investor requires a 15-percent, before-tax return? $ 2,619 2,604 2,594 2,587arrow_forwardConsider the following data showing the cash flows per year from a real estate property: Year: 1 2 3 4 5 Cash Flow: $21,000 $22,000 $23,000 $24,000 $25,000 After the 5th year, cash flows are expected to rise at a constant rate of 2.5% per year for the many years in the future. Your cost of money (interest paid on the loan) is 5.5% per year. A. Calculate the appraisal value of the house. B. Define and calculate the cap rate. Explain what it means. (Answer with respect to Excel for both)arrow_forwardPena Company is considering an investment of $30,455 that provides net cash flows of $9,400 annually for four years. (a) If Pena Company requires a 7% return on its investments, what is the net present value of this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.) (b) Based on net present value, should Pena Company make this investment? Complete this question by entering your answers in the tabs below. Required A Required B What is the net present value of this investment? Years 1-4 Net present value Net Cash Flows X PV Factorarrow_forward
- Gomez is considering a $235,000 Investment with the following net cash flows. Gomez requires a 12% return on its Investments. (PV of $1, FV of $1. PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Net cash flows Year 1 $72,000 Year 2 $49,000 Year 3 Year 4 $90,000 $129,000 Year 5 $51,000 (a) Compute the net present value of this Investment. (b) Should Gomez accept the Investment? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of this investment. Note: Round your answers to the nearest whole dollar. Net Cash Year Flows Present Value of 1 at 12% Present Value of Net Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 Totals Initial investment Net present valuearrow_forwardSandhill Company earns 11% on an investment that will return $459,000 8 years from now. Click here to view the factor table. What is the amount Sandhill should invest now to earn this rate of return? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 2 decimal places, eg. 25.25.) Sandhill Company should invest $arrow_forwardCrane Company is considering an investment that will return a lump sum of $930,000 6 years from now. Click here to view the factor table. What amount should Crane Company pay for this investment to earn an 9% return? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 2 decimal places, e.g. 25.25.) Crane Company should pay $arrow_forward
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