Homework Ch #24
PNG
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School
Temple University *
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Course
5001
Subject
Finance
Date
Jan 9, 2024
Type
PNG
Pages
1
Uploaded by MateFogSardine33
Homework
Ch
#24
€
Submitted
Year
1
Year
2
Year
3
Year
4
Year
5
16.66/16.66
Net
cash
flows
$80,000
$50,000
$70,000
$250,000
$13,000
points
awarded
Beyer
Company
is
considering
buying
an
asset
for
$360,000.
It
is
expected
to
produce
the
following
net
cash
flows.
Compute
the
payback
period
for
this
investment.
(Cumulative
net
cash
outflows
must
be
entered
with
a
minus
sign.
Round
your
Payback
Period
answer
to
2
decimal
places.)
=
e
e
eBook
Initial
investment
$
(3600000
|$
(360,000)
@
5y
Year
1
80,000
@
(280,000)
@
Hint
Year
2
50,000
@
(230,000
@
Year
3
70,000
@
(160,000)
@
=
Year
4
250,000
@
90,000
@
o
Year
5
13,000
@
103,000
@
B
Total
$
103,000
References
Payback
period
=
’
364
@
‘years
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What is the present value of an investment with the following cash flows?
Year 1 $14,000
Year 2 $20, 000
Year 3 $30,000
Year 4. $ 43,000
Year 5. $ 57,000
Use a 7% discount rate, and round your answer to the nearest $1.
a. $128, 487
b. $107, 328
c. $112, 346
d. $ 153, 272
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QUESTION 6
Seaborn Co. has identified an investment project with the following cash flows.
Year Cash Flow
$950
1,050
1,320
1,200
1
2
3
4
If the discount rate is 10 percent, what is the present value of these cash flows?
3542.76
3578.84
3418.66
4470.00
3847.03
Click Save and Submit to save and submit. Click Save All Answers to save all answers.
SEP
28
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A
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Assume that an investment provides the following cash inflows over a three-year period:
Year 1
Year 2
Year 3
Total
$5,000
5,000
7,000
$ 17,000
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables
provided.
Assuming a discount rate of 17%, what is the present value of these cash inflows?
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Francoeur Co. has identified an investment project with the following
cash flows:
Year
1
2
3
4
Cash Flow
$830
$1,150
$1,410
$1,550
If the discount rate is 8 percent, what is the present value of these cash
flows as of Year O?
$4,013.06
$3,406.47
$3,679.59
$4,549.11
$4,271.21
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Mendez Company has identified an investment project with the following cash flows.
Year
1234
Cash Flow
$ 1,090
940
1,490
1,850
a. If the discount rate is 12 percent, what is the present value of these cash flows?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
b. What is the present value at 15 percent?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
c. What is the present value at 21 percent?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
a. Present value at 12 percent
b. Present value at 15 percent
c. Present value at 21 percent
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Question 17
The net cash flows for two projects, A and B, are as follows:
Year o
3
-220000 -5000 122000 130000
-60000 -10000 -120000 200000
1
2
A
Given a discount rate of 4.5%:
Blank 1: Calculate the net present value of project A.
Blank 2: Estimate the IRR of project A. Write your answer as a percent %. If your
answer has a decimal, round to 2 places.
Blank # 1
Blank # 2
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QUESTION 19
Simkins Renovations Inc. is considering a project that has the following cash flow data. What is the
project's IRR?
Year
Cash flows
A. 28.55%
O B. 24.50%
○ C. 20.88%
O D. 17.63%
○ E. 14.67%
○ F. 11.98%
G. 9.51%
OH. 7.24%
0
-$850
1
2
3
4
$300
$390
$280
$270
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QUESTION 2
You expect to receive $100 in year 1, $150 in year 2, and $200 in year 3 if you invest in Project XYZ. The project requires you to make an initial investment of $150 in year 0. You also expect to incur
the following expenses: $80 in year 1, $80 in year 2, $100 in year 3. Suppose the current discount rate is 10% and remain the same. Suppoe all cash flows are incurred at the end of each year.
What is the dynamic payback period? (round to 2nd decimal place)
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QUESTION 23
Reno Company is considering a project that has the following cash flow data. What is the project's IRR?
Year
Cash flows
O a. 14.05%
O b. 15.61%
OC. 17.34%
O d. 19.27%
O e. 21.20%
0
-$1,050
1
$400
2
$400
3
$400
4
$400
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22 see picture
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Cash Flows
Project A ($ in millions)
Project B ($ in millions)
Initial Outflow
– 211
– 82
Year 1
43
22
Year 2
71
40
Year 3
66
40
Year 4
65
12
Calculate the payback period of each investment
Which investments does the company accept if the cut-off payback period is three years? Four years?
If the company invests by choosing projects with the shortest payback period, which project would it invest in?
If the company uses discounted payback with a 12% discount rate and a 4-year cut-off period, which projects will it accept?
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3 QS 24-1 (Algo) Payback period and equal cash flows LO P1 Park Company is considering an investment of $29,000 that provides net cash flows of $13,400 annually for four years. What is the investment's payback period? Numerator: Initial investment 1 Payback Period Denominator: Annual net cash flow Payback Period Payback period
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For the given cash flows, suppose the firm uses the NPV decision rule.
Year
0
1
2
3
Cash Flow
-$ 41,000
20,000
23,000
14,000
a. At a required return of 11 percent, what is the NPV of the project?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
b. At a required return of 24 percent, what is the NPV of the project?
Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer
to 2 decimal places, e.g., 32.16.
a. NPV
b. NPV
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Payback Period, IRR, and Minimum Cash Flows
The management of Mesquite Limited is currently evaluating the following investment proposal:
Time 0 Year 1 Year 2 Year 3 Year 4
Initial investment $250,000
Net operating
cash inflows
$100,000 $100,000 $100,000 $100,000
G
(a) Determine the proposal's payback period.
2.5
years
(*
(b) Determine the proposal's internal rate of return. (Refer to Appendix 24B if you use the table approach.)
22
(c) Given the amount of the initial investment, determine the minimum annual net cash inflows required to obtain an internal rate of return of 8
percent. Round the answer to the nearest dollar.
$ 89,344 *
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