effective cost of { [ (1 + .15/365)^365 ] - 1 } * 100 = 16.18% per year.
B. The present value of an annuity is unaffected by the number of the annuity payments.
Now we want to examine the analysis business report concerning the cost of capital that has been increased at 28% in accordance with the Net Present Value which is $500,000 the question being would still be worth it to make the investment to the company (Needles, 2010). While at the same time the internal rate of return is still at 21% which is lower than the 25% in the expenditures. In reflection of these calculations the investment would not
b. What is the present value of this annuity if the opportunity cost rate is 10% annually? 10% compounded semiannually?
6. Suppose a potential customer wants to know the project’s profitability index (PI). What is the
8. What is the net present value of the following cash flows discounted at 12%?
9. You want to purchase a business with the following cash flows. How much would you pay for this business today assuming you needed a 14% return to make this deal?
The interest rate of a term deposit is at 5.2% per annum. Available investment fund is $200,000. Term Deposit will yield $10,400 p.a. by using $200,000 multiply by 5.2%. However, for compounded interest rate, 5 years investment will be $257,697 (ROI = $57,697). And 10 years investment will be $332,038 (ROI = $132,038), assume that the interest rate is constant within 10 years period. The risk is considered minimal.
14. How close does the terminal value in part 2 get to the present value using the growing annuity formula in part 3?
Estimate the project’s operating cash flows for each year of the project’s economic life. (Hint: Use Table 2 as a guide)
Estimated machinery life: 3 years (after which there will be zero value for the equipment and no further cost savings)
b.What are the amounts and timing of the acquisition investment’s free cash flow from 2013 through 2022?
income is $26.03 for year 1. Similarly, the present value of the firm at time 1 is
5. The project is assumed to end in year 4. Do you think that this is realistic? Can you estimate the value of the project’s operating cash flows beyond year 4? State any assumptions you made.
Assume that the annual payments in the sixth year is equal to the rental payment in the fifth year ( 112.9 and 86.0) and the remainder of the lump sum values (54.6 and 17.8) is due in the seventh year. With a discount rate of 5.4%, the present values of the rental payments for the years 2006 and 2007 are as follows: