8
png
School
Liberty University *
*We aren’t endorsed by this school
Course
530
Subject
Finance
Date
Feb 20, 2024
Type
png
Pages
1
Uploaded by ProfOkapiPerson648
c d If you insulate your office for $15,000, you will save $1,500 a year in heating expenses. These savings will last forever. a. and b. What is the NPV of the investment when the cost of capital is 5%? What if it is 10%? Cost of Capital b a. 5% $ 15,000 b. 10% 0 c. What is the IRR of the investment? Note: Enter your answer as a whole percent. [IRR T 10{%| d. What is the payback period on this investment? |Payback period [ 10| years Explanation: Some values below may be shown as rounded for display purposes, though unrounded numbers should be used for actual calculations. . The present value of the savings is $1,500 + r, since the savings are forever, they look just like a Perpetuity, and we use the Perpetuity formula to set a present value on that investment. r=0.05= PV = $30,000 and NPV = -$15,000 + $30,000 = $15,000 r=0.10 = PV = $15,000 and NPV = -$15,000 + $15,000 = $0 . IRR=0.10, or 10% At this discount rate, NPV = $0 . Payback period = Initial investment + Annual cash flow = $15,000 + $1,500 = 10 years
Discover more documents: Sign up today!
Unlock a world of knowledge! Explore tailored content for a richer learning experience. Here's what you'll get:
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Documents
Related Questions
Please show detailed steps and correct.
arrow_forward
If you insulate your office for $19,000, you will save $1,900 a year in heating expenses. These savings will last forever.
a. What is the NPV of the investment when the cost of capital is 5%? 10%?
b. What is the IRR of the investment?
c. What is the payback period on this investment?
arrow_forward
If you insulate your office for $18,000, you will save $1,800 a year in heating expenses. These savings will last forever.
a. What is the NPV of the investment when the cost of capital is 4%? 10%?
b. What is the IRR of the investment? (Enter your answer as a whole percent.)
c. What is the payback period on this investment?
arrow_forward
f you insulate your office for $16,000, you will save $1,600 a year in heating expenses. These savings will last forever.
a. What is the NPV of the investment when the cost of capital is 5%? 10%?
arrow_forward
If you insulate your office for $16,000, you will save $1,600 a year in heating expenses. These savings will last forever.
a. What is the NPV of the investment when the cost of capital is 5%? 10%?
arrow_forward
I need help with accounting question
arrow_forward
s
Book
Het
Print
ferences
If you insulate your office for $13,000, you will save $1,300 a year in heating expenses. These savings will last forever.
a. and b. What is the NPV of the investment when the cost of capital is 8%? What if it is 10%?
Cost of
Capital
a. 8%
b. 10%
1320
NPV
arrow_forward
1
Solve the following rate of return problems.
a. An investment of $1,700 today returns $64,000 in 50 years. What is the internal rate of return on this investment?
b. An investment costs $850,000 today and promises a single payment of $12.9 million in 22 years. What is the promised rate of
return, IRR, on this investment?
c. What return do you earn if you pay $24,410 for a stream of $4,000 payments lasting 10 years?
Note: Round your answers to 2 decimal places.
a. IRR
b. IRR
c. IRR
7.53 %
%
arrow_forward
Consider a project in which you have to invest $15,000 today and you will receive $24847 in one
year. What is the internal rate of return (IRR) of this project?
The IRR is % (Keep 2 decimal places).
Answer:
arrow_forward
Consider an investment that cost 100,000 as a cash inflow of 35,000 every year for 4 years required Return is 15% the required. Payback is 3 years. Please use formula.
what is the pay back Period Should we accept the investment ? why?
What is the NPV? Should we accept investment why?
what is the PI? Should we accept investment? why?
shoukd we accept the project ? Why?
arrow_forward
You would like to invest in the following Project: Year Cash Flow 0 $-55,000 1 30,000 2 37,000 Your boss insists that only projects that return $1.10 in today's dollars for every $1 invested can be accepted. The discount rate is 10%. Based on this criteria, should you accept the Project? Why?
arrow_forward
What is the IRR?
note: PLEASE YOU DONT USE EXCEL!
arrow_forward
You are looking at an investment that will pay you $22,995 in year 2, $43,270 in year 4 and $41,525 in year 6. If your required return is 8.73%, what is the
most you should pay for the investment? (In other words, how much is the project worth today?)
arrow_forward
1.
You have an opportunity to invest $109,000 now in return for
$79,500 in one year and $29,900 in two years. If your cost of capital is
8.8%, what is the NPV of this investment?
The NPV will be $__________________(Round to the nearest cent.)
arrow_forward
1. You have an opportunity to invest $50,000 now in return for $60,000 in
one year. If your cost of capital is 8%, what is the NPV of this investment?
arrow_forward
Help please
arrow_forward
You run a construction firm. You have just won a contract to build a government office complex. Building it will require
an investment of $10.1010.10 million today and $5.105.10 million in one year. The government will pay you $21.2021.20
million in one year upon the building's completion. Suppose the interest rate is 10.2 % 10.2 %. a. What is the NPV of
this opportunity? b. How can your firm turn this NPV into cash today?
arrow_forward
You run a construction firm. You have just won a contract to build a government office complex. Building it will require an investment of $10.2 million today and $4.7 million in one year. The
government will pay you $20.7 million in one year upon the building's completion. Suppose the interest rate is 10.6%.
a. What is the NPV of this opportunity?
b. How can your firm turn this NPV into cash today?
a. What is the NPV of this opportunity?
The NPV of the proposal is $million (Round to two decimal places.)
CZTE
arrow_forward
A project that requires an initial investment of $340,000 is expected to have an after-tax cash flow of $70,000 per year for the first two years, $90,000 per year for the next two years, and $150,000 for the fifth year? Assume the required return for this project is 10%. Use formula solve Please!!!a. What is the NPV of the project?
b. What is the IRR of the project?
c. What is the MIRR of the project?
d. What is the PI of the project?
arrow_forward
You run a construction firm. You have just won a contract to build a government office complex. Building it will require an investment of $10.5 million today and $5.4 million in one year. The
government will pay you $21.6 million in one year upon the building's completion. Suppose the interest rate is 10.1%.
a. What is the NPV of this opportunity?
b. How can your firm turn this NPV into cash today?
a. What is the NPV of this opportunity?
The NPV of the proposal is $
million. (Round to two decimal places.)
arrow_forward
You have an investment opportunity that requires an initial investment of $5,000 today and will pay $6,000 in one year. What is the IRR of this opportunity?
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you

Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Related Questions
- Please show detailed steps and correct.arrow_forwardIf you insulate your office for $19,000, you will save $1,900 a year in heating expenses. These savings will last forever. a. What is the NPV of the investment when the cost of capital is 5%? 10%? b. What is the IRR of the investment? c. What is the payback period on this investment?arrow_forwardIf you insulate your office for $18,000, you will save $1,800 a year in heating expenses. These savings will last forever. a. What is the NPV of the investment when the cost of capital is 4%? 10%? b. What is the IRR of the investment? (Enter your answer as a whole percent.) c. What is the payback period on this investment?arrow_forward
- f you insulate your office for $16,000, you will save $1,600 a year in heating expenses. These savings will last forever. a. What is the NPV of the investment when the cost of capital is 5%? 10%?arrow_forwardIf you insulate your office for $16,000, you will save $1,600 a year in heating expenses. These savings will last forever. a. What is the NPV of the investment when the cost of capital is 5%? 10%?arrow_forwardI need help with accounting questionarrow_forward
- s Book Het Print ferences If you insulate your office for $13,000, you will save $1,300 a year in heating expenses. These savings will last forever. a. and b. What is the NPV of the investment when the cost of capital is 8%? What if it is 10%? Cost of Capital a. 8% b. 10% 1320 NPVarrow_forward1 Solve the following rate of return problems. a. An investment of $1,700 today returns $64,000 in 50 years. What is the internal rate of return on this investment? b. An investment costs $850,000 today and promises a single payment of $12.9 million in 22 years. What is the promised rate of return, IRR, on this investment? c. What return do you earn if you pay $24,410 for a stream of $4,000 payments lasting 10 years? Note: Round your answers to 2 decimal places. a. IRR b. IRR c. IRR 7.53 % %arrow_forwardConsider a project in which you have to invest $15,000 today and you will receive $24847 in one year. What is the internal rate of return (IRR) of this project? The IRR is % (Keep 2 decimal places). Answer:arrow_forward
- Consider an investment that cost 100,000 as a cash inflow of 35,000 every year for 4 years required Return is 15% the required. Payback is 3 years. Please use formula. what is the pay back Period Should we accept the investment ? why? What is the NPV? Should we accept investment why? what is the PI? Should we accept investment? why? shoukd we accept the project ? Why?arrow_forwardYou would like to invest in the following Project: Year Cash Flow 0 $-55,000 1 30,000 2 37,000 Your boss insists that only projects that return $1.10 in today's dollars for every $1 invested can be accepted. The discount rate is 10%. Based on this criteria, should you accept the Project? Why?arrow_forwardWhat is the IRR? note: PLEASE YOU DONT USE EXCEL!arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College

Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College