You are considering two mutually exclusive projects with unequal lives. One of theprojects has an up-front cost of $60,000 (CF0= -60,000) and produces positive after-tax cash inflows of $20,000 a year at the end of each of the next 7 years. Assumingthe cost of capital is 9.3%, what is the equivalent annual annuity of the project?$5,948$6,398$7,298$7,958$8,828$9,788

Given information: Initial investment = -$60,000 Cost of capital (r) = 9.3% or 0.093 Fixed Cash…

Answered: You are considering two mutually…

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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Similar questions

You are considering two mutually exclusive projects with unequal lives. One of the projects has an up-front cost of $59,000 (CF0= -59,000) and produces positive after-tax cash inflows of $21,000 a year at the end of each of the next 5 years. Assuming the cost of capital is 9.2%, what is the equivalent annual annuity of the project?
You have been offered a project paying $300 at the beginning of each year for the next 20 years. What is the maximum amount of money you would invest in this project if you expect 9 percent rate of return to your investment? O $2,738.70 $15,347.70 O $6,000.00 O $2,985.18
A certain project requires a $1 million initial investment, and will yield incremental after-tax cash flows of $225,000 per year for 5 years. What is the IRR of the project, stated as an APR compounded annually?
Project X has an upfront $3.5 million capital expe which is converted into an equivalent seven year annuity at a discount rate of 8% per year. Project Z has a $7 million initial capital outlay and will last for 14 years. Project Z has the same discount rate as Project X. What is the annualized capital cost of Project X? O $766,912 O $742,753 O $528,050 O $672,253
A project requires a $1 million initial investment, and will yield incremental after-tax cash flows of $300,000 per year for 5 years. What is the NPV of the project if the required return is 12% APR compounded annually?
A project requires a $1 million initial investment, and will yield incremental after-tax cash flows of $300,000 per year for 5 years. What is the IRR of the project, stated as an APR compounded annually?
Consider two mutually exclusive projects – Project X and Project Y with identical initial outlays of RM90,000 and depreciable lives of 5 years. Project X is expected to produce free cash flows of RM32,787 each year. Project Y is expected to generate a single after-tax net cash flow of RM223,880 in year 5. The cost of capital is 15 percent. Required:(a) Calculate the net present value for each project
RadCo is considering two projects. The first, project A. has $400,000 income after the first year which increases by 8% each year for a total of 5 years. Project B has $450,000 income after the first year which increases by $25,000 each year for a total of 5 years. RadCo can only choose one project. Based on present worth today, which project should RadCo choose? The interest rate is 6% annual compounded annually.
A project requires a $1 million initial investment, and will yield incremental after-tax cash flows of $225,000 per year for 5 years. What is the IRR of the project, stated as an APR compounded annually?
A project that costs $2,300 to install will provide annual cash flows of $730 for each of the next 5 years. a. Calculate the NPV if the opportunity cost of capital is 12%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV b. Is this project worth pursuing? Yes O No c. What is the project's internal rate of return IRR? (Do not round intermediate calculations. Round your answer to 2 decimal places.) %24
An investment proposal calls for $282,061 payment now and a second $140,722 6 years from now. The investment is for a project with a perpetual life. The annual interest rate is 6%. What is the approximate capitalized cost?
A project that provides annual cash flows of $14,000 for nine years costs $70,000 today. At what discount rate would you be indifferent between accepting the project and rejecting it? Should you accept the project in the previous question if your cost of capital is equal to 15%?

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