Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Blink of an Eye Company is evaluating a 5-year project that will provide cash flows of $40,900, $88,590, $63,490, $61,690, and $44,990, respectively. The project has an initial cost of $193,440 and the required return is 8.4 percent. What is the project's NPV?
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- Pharoah Inc. is contemplating a capital project with a cost of $149000. The project will generate net cash flows of $44000 for year 1, $60000 for year 2 and $59000 for year 3. The asset has a salvage value of $10000 and straight-line depreciation will be used. The company's required rate of return is 10%. Year 1 2 3 0 0 0 0 Present Value of 1 at 10% 0.909 0.826 0.751 PV of an Annuity of 1 at 10% 0.909 1.736 2.487 acceptable because it has a positive NPV. unacceptable because it has a zero NPV. unacceptable because it earns a rate less than 10%. acceptable because it has a return of greater than 10%. SUPPOarrow_forwardConnor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%. project 1 project 2 initial investment $(510,000) $(685,000) cash flow year 1 485,000 610,000 Compute the following for each project: NPV (net present value) PI (profitability index) IRR (internal rate of return) Based on your analysis, answer the following questions : Which is the best choice? Why? Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain.arrow_forwardConsider the following projects, X and Y where the firm can only choose one. Project X costs $1500 and has cash flows of $678, $652, $347, $111, $54, $16 in each of the next 6 years. Project Y also costs $1500, and generates cash flows of $738, $693, $405 for the next 3 years, respectively. WACC=11%.Plot NPV profiles for the two projects. Identify the projects’ IRRs on the graph.arrow_forward
- XYZ is evaluating a project that would last for 3 years. The project's cost of capital is 15.60 percent, its NPV is $43,200.00 and the expected cash flows are presented in the table. What is X? Years from today 0 1 2 3 Expected Cash Flow (in $) -55,800 71,000 -15,900 X O An amount less than $43,200.00 or an amount greater than $82,666.00 O An amount equal to or greater than $70,205.00 but less than $82,666.00 O An amount equal to or greater than $60,505.00 but less than $70,205.00 O An amount equal to or greater than $53,257.00 but less than $60,505.00 O An amount equal to or greater than $43,200,00 but less than $53,257.00 Marrow_forwardPlease see attached image.arrow_forwardYou are considering investing in a project that has an initial cost of $10,000, a WACC of 10%, with the estimated net cashflows for years 1, 2, 3 being equal to $4000, $ 9,000, $21,000. What is the project’s NPV?arrow_forward
- The management of NUBD Co. is considering three investment projects-W, X, and Y. Project W would require an investment of P21,000, Project X of P66,000, and Project Y of P95,000. The present value of the cash inflows would be P22,470 for Project W, P73,920 for Project X, and P98,800 for Project Y. Rank the projects according to the profitability index, from most profitable to least profitable. *arrow_forwardCompany X is considering an investment project that requires an initial outlay of $500,000 and is expected to generate annual cash flows of $150,000 for five years. The company's cost of capital is 10%. • Calculate the NPV of the proposed investment project. Determine whether it is financially viable for Company X.arrow_forwardNiagra Falls Power and Light is considering a project that will produce annual cash flows of $37,500, $46,200, $56,900, and $22,400 over the next four years, respectively. What is the internal rate of return if the project has an initial cost of $113,500?arrow_forward
- A project has an initial cost of $52,125, expected net cash inflows of $12,00 per year for 8 years, and a cost of capital of 12%. P11-1. What is the project's NPV? P11-2. What is the project's IRR? P11-3. What is the project's MIRR? P11-4. What is the project's PI? P11-5. What is the project's payback periodarrow_forwardBlink of an Eye Company is evaluating a 5-year project that will provide cash flows of $35,700, $62,070, $62,450, $60,260, and $43,300, respectively. The project has an initial cost of $158,080 and the required return is 8.3 percent. What is the project's NPV?arrow_forwardYou calculate your firm’s WACC is 11.5% and you are evaluating a project that will generate the following cash flows: year 1 = $20,000, year 2 = $30,000, and year 3 = $50,000. Calculate the NPV of the project if the cost of the project is $90,000.arrow_forward
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