Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 1 a. What is the regular payback period for each of the projects? Round your answers to two decimal places. Project A: years Project B: years c. Calculate the NPV of the two projects. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ Calculate the IRR of the two projects. Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: If the two projects are independent and the cost of capital is 8%, which project or projects should the firm undertake? The firm should undertake -Select- 2 Project B: years b. What is the discounted payback period for each of the projects? Do not round intermediate calculations. Round your answers to two decimal places. Project A: years % 3 4 S 10 15 20 20 10 8 6

Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of dollars): Year Project A Project B 1 a. What is the regular payback period for each of the projects? Round your answers to two decimal places. Project A: years Project B: years c. Calculate the NPV of the two projects. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ Calculate the IRR of the two projects. Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: If the two projects are independent and the cost of capital is 8%, which project or projects should the firm undertake? The firm should undertake -Select- 2 Project B: years b. What is the discounted payback period for each of the projects? Do not round intermediate calculations. Round your answers to two decimal places. Project A: years % 3 4 S 10 15 20 20 10 8 6

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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Consider 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%.Calculate the projects’ NPVs, IRRs, payback periods.
Please show detailed steps and correct.
A project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 8%. What is the project's IRR? Round your answer to two decimal places.
An investment project has annual cash inflows of $4,400, $3,900, $5,100, and $4,300, for the next four years, respectively. The discount rate is 14 percent. a. What is the discounted payback period for these cash flows if the initial cost is $5,700? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the discounted payback period for these cash flows if the initial cost is $7,800? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the discounted payback period for these cash flows if the initial cost is $10,800? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Discounted payback period years b. Discounted payback period years C. Discounted payback period years
You are responsible to manage an IS project with a 4-year horizon. The annal cost of the project is estimated at $40,000 per year, and a one-time costs of $120,000. The annual monetary benefit of the project is estimated at $96,000 per year with a discount rate of 6 percent. a. Calculate the overall return on investment (ROI) of the project. b. Perform a break-even analysis (BEA). At what year does break-even occur?
A project has an initial cost of $61,450, expected net cash inflows of $11,000 per year for 10 years, and a cost of capital of 8%. What is the project's MIRR? Round your answer to two decimal places.
Two projects, Alpha and Beta, are being considered using the payback method. Each has an initial cost of $100,000. The annual cash flows for each project are listed below. a) What is the pay back period in years for Alpha? (round to two decimal places) b) What is the pay back period in years for Beta? (round to two decimal places) Year Project Alpha Project Beta 1 25,000 15,000 2 25,000 25,000 3 25,000 45,000 4 25,000 30,000 5 25,000 20,000 25,000 15,000
Perform a financial analysis for a project. Assume that the projected costs and benefits for this project are spread over 6 years as follows. Estimated costs are $1,100,000 in Year 0, and $50,000 each year in Years 1, 2, 3, 4, 5 and 6. Estimated benefits are $0 in Year 0, and $450,000 each year in Years 1, 2, 3, 4, 5 and 6. Use a 15% discount rate. Suppose the required payback period and discounted payback period are both 3 years. (1) Calculate the payback period (based on the original cash flows without discounting), and evaluate the project based on the payback method. (2) Calculate the discounted payback period (based on discounted cash flows), and evaluate the project based on the discounted payback method. (3) Evaluate the project using the NPV method, and explain whether you would recommend investing in this project.
The expected profits from a $165,000 investment are $55,000 in Year 1, $80,000 in Year 2, and $120,000 in Year 3. What is the investment’s payback period?
A project has an initial cost of $60,000, expected net cash inflows of $12,000 per year for 9 years, and a cost of capital of 13%. What is the project's payback period? Round your answer to two decimal places.
Consider 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%.A) Draw the timelines for both projects: X and Y.
A project is expected to cost $30,000, with the capital due immediately. Four annual cash flows are promised at the end of each respective year from the project as follows: Year 1: $4,000 Year 2: $12,000 Year 3: $33,000 The hurdle rate for the project is 12%. The manager wants projects to have a Payback of two years or less. 1.WHAT is the NPV of this project? 2.What is the Payback? 3.What is the IRR? 4.Do you accept the project?

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