a farmer has developed projection of future cash flows from a new variety of brain. Yr1=50, Yr2=60, Yr3=75, Yr4=80, Yr5=90. He has a minimum required rate of return on his investments of 10 percent. How much should he be willing to pay for this investment opportunity?
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- Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?An investor has to decide how much he will be willing to pay for an investment that generates the following stream of future cash flows: Yr1 = 35, Yr2 = 40, Yr3 = 45, Yr4 = 50, Yr5= 55. His minimum required rate of return is 9 percent. How much should he be willing to pay for it today?An investor is evaluating a “boom or bust” investment that in some years will generate an excellent cash flow and in some years will generate no cash at all or a negative cash flow. The following projected cash flow reflects this: Yr1 = 100, Yr2 = negative 25, Yr3 = 150, Yr4 = 0, Yr5 = 130. If her minimum required rate of return is 10 percent, what is the maximum amount she should pay for this investment? Group of answer choices 530 263 350 425
- An investor is evaluating a "boom or bust" investment that in some years will generate an excellent cash flow and, in some years, will generate no cash at all or a negative cash flow. The following projected cash flow reflects this: Yr1 = 100, Yr2 = negative 25, Yr3 = 150, Yr4 = 0, Yr5 = 130. If her minimum required rate of return is 10 percent, what will be the value of her investment at the end of the investment horizon?Imagineering, Inc., is considering an investment in CADCAM-compatible design software with the cash flow profile shown in the table below. Imagineering’s MARR is 18%/yr. Solve, a. What is the internal rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on internal rate of return? c. Should Imagineering invest?You are considering an investment in a clothes distributer. The company needs $105,000 today and expects to repay you $120,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your cost of capital is 17%. What does the IRR rule say about whether you should invest? What is the IRR of this investment oppurtunity? The IRR of this investment opppurtunity is ____%
- Imagine you are investing $100,000 into a project A. MARR is 15% This investment will bring you the following positive cash flows: Year 1: $31,000 Year 2: $31,000 Year 3: $31,000 Year 4: $31,000 Year 5: $31,000 a.Draw the cash flow diagram b.Find the present worth of the investment c.Find the annual worth of the investmentHi can you help with this question please? An investment has the following cash flow profile. For each value of MARR below, what is the minimum value of X such that the investment is attractive based on an internal rate of return measure of merit? EOY 0 1 2 3 4 Cash Flow $(30,000.00) $ 6,000.00 $ 13,500.00 $X $ 13,500.00 MARR is 12 percent/yearA firm has two possible investment with the following cash inflows. Each investment cost $480, and the cost of capital is ten percent. Cash Inflows Year A B 1 $300 $200 2 200 200 3 100 200 a. Based only on visual inspection, which investment is to be preferred and why? b. Based on each investment’s net present value, which investment(s) should the firm make? c. Based on each investment’s internal rate of return, which investment(s) should the firm make? Is this the same answer you obtained in part b? d. If the cost of capital were to increase to 14 percent, which investment(s) should the firm make?
- Being Finance Manager of Salalah Textiles Industries, you need to invest an amount for OMR 50,000 in the investment market. Assume the market rate of return is 0.11, risk free rate of return is 2.75% and Beta is .73, then:Required:a) What should be required rate of return for your investment?Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively. Time: 0 1 2 3 4 5 Cash flow −$231,000 $65,400 $83,600 $140,600 $121,600 $80,800 Use the discounted payback decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Discounted payback _____.__ yearsYour firm has limited capital to invest and is therefore interested in comparing projects based on the profitability index (PI), as well as other measures. What is the PI of the project with the estimated cash flows below? The required rate of return is 16.7%. Round to 3 decimals. Year 0 cash flow = -720,000 Year 1 cash flow = -160,000 Year 2 cash flow = 540,000 Year 3 cash flow = 500,000 Year 4 cash flow = 430,000 Year 5 cash flow = 470,000