Q: Which is the better investment option?
A: The process of finding the present value using the future value, interest rate and the compounding…
Q: also solve for the future worth method
A: While choosing which investment project will be undertaken, different investment appraisal…
Q: Discuss Present Value of Perpetuities?
A: Perpetuity is the stream of cash flows or payments that are made at equal intervals that do not have…
Q: ORTH METHO
A: Annual Worth is uniformly equivalent AW of all estimated income and costs during the lifetime of a…
Q: Evaluate the two alternatives A and B and decide the economic justified alternative using: Present…
A: Comment- Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…
Q: Define the term Risk-free real return?
A: Risk-free real return is a hypothetical number that mirrors the foreseen return on a venture that…
Q: Explain the term Present Value of Perpetuities with an example?
A: Present value is the current value of a cash flow that can be occurred in future. Perpetuity is an…
Q: How would the risk premium work out for a riskier investment?
A: A risk premium is a return on venture over the hazard free rate a financial specialist requires to…
Q: What is the equivalent total investment cost (future worth)?
A: Answer: Equivalent total investment cost (future worth) method discounted cash flow method converts…
Q: What are some possible financial decisions in which using the Present Value (PV) formula might be…
A: The present value (PV) is the current value provided a defined rate of return of a future amount of…
Q: When considering multiple possible investments, why are rates of return preferable than monetary…
A: An investment's net profit or loss over a certain period expressed as a percentage of the…
Q: Summarize the basic procedure of Net-Present-Worth Criterion?
A: Step 1: Initially ascertain the initial investment of the initial outlay amount (CF0). The initial…
Q: What is the name principal future value a. b. Ob
A: Annuity refers to a series of payments that are made at equal intervals of time.They can be…
Q: Should the analyses show the sensitivity of the discounted net present value and other outcomes?
A: The question is based on the concept of a sensitivity analysis, used as a analysis tool in capital…
Q: If you are to choose between viability and profitability, which one would you choose? Why?
A: A company's viability indicates that it is (or has the potential to be) profitable. A profitable…
Q: Classify method of comparing economic worth as a ranking method or as an incremental method. a. CW…
A: There are various methods that are used to compare investment alternatives on the basis of maximum…
Q: What is annual worth method, future worth method, and present worth method in comparing alternative,…
A: There are various alternatives for a project or investments that can be undertaken or chosen by the…
Q: What is the relationship between present value and future value?
A: Future Value : FV is that value which will be received in near future. Present Value : PV is that…
Q: Which alternative offers you the highest effective rate of return?
A: Investment appraisal is the method of evaluating and selecting investments from various investment…
Q: Give an example of the Present Value of Perpetuities?
A: Perpetuity is a continuous annuity, a progression of equivalent interminable cash flows happening…
Q: IF YOU WILL INVEST IN ONE OF THE INVESTMENT OPTIONS, WHAT WOULD IT BE AND WHY? ELABORATE YOUR ANSWER
A: Out of the investment options available, the expected return of equity is higher than other…
Q: How can we make the equivalence calculations of future worth?
A: Future value is the value of the current or the present amount at future specified time for the…
Q: present worth analysis, whic
A: Introduction: Present worth analysis is defined as analysis in which the cash flows of the project…
Q: Which Alternative - if any, Should be selected based upon a present worth analysis?
A: NPV means Net Present Value. "NPV is the differentiation between net cash inflow and net cash…
Q: What are the three components of the rate of return in order to earn any kind of investment?
A: Following are the three components of the rate of return in order to earn any kind of investment:…
Q: Which alternative should be selected? Use a challenger-defender rate of return analysis.
A: Given, Particulars Projects A($) B($) C($) D($) Initial investment 8500 18500 26500 30000…
Q: What are your
A: Alternative finance refers to financial channels, processes, and instruments that have emerged…
Q: What is the potentially acceptable investment alternative?
A: An alternative investment is a financial asset that doesn't can be categorized as one of the…
Q: compare Future Value and Present Value?
A: The comparison between present value and future value is as follows:
Q: What is the net income for both options assuming present worth method?
A: PRESENT WORTH OF BATCH Depreciation = (50,000 - 6000) / 5 = $8800 P{B} = -50,000 - (10,000) (P/A,…
Q: Compare the mutually exclusive alternatives based on the rate of return?
A: Mutually exclusive projects are the projects out of which one best project is selected due to lack…
Q: How the risk and return trade-off can be applied in real life?
A: The risk-return tradeoff states that the return rises with an increase in risk. Investors use this…
Q: a. Compute the net present value of each opportunity. Which should Mr. Kearns adopt based on the net…
A: Net Present Value: Net present value is the profitability of a project in dollar terms. It is…
Q: What is the net present value method?
A: Net Present Value Method: It is the present value of the annual cash flows and the project initial…
Q: Define the term Equivalent worth-calculation?
A: To define the term Equivalence worth calculation.
Q: which investment is preferable?
A: The present value is the present worth of the amount that will be paid or received at present.
Q: Explain Comparing Risk Premiums?
A: Risk premium is additional premium an investor achieves by investing in a riskier financial…
Q: How can we invest in two assets with similar return characteristics?
A: An asset is something that provides benefits in the future to its owner. There are two types of…
Q: Describe the method of developing a Present Worth Distribution?
A: Present value or Present Worth of an investment or a project is the value of future cash flow…
Q: Illustrate the market interest rate to find the net present worth?
A: Investors frequently find the present worth of the fund flows for the reason that savers receive the…
Q: Describe the process of Calculating Present Worth?
A: Step-1: The initial invested amount should be ascertained and the initial investment is the sum…
Q: What is the Present Worth Value for the second alternative if you are going to alternatives on a…
A: Time value of money (TVM) refers to the method or technique which is used to measure the amount of…
Q: Which are two types of financially sound RPI strategies?
A: RPI refers to responsible property investing.
Q: Which is more important, saving or investing? Justify your answer
A: First let us know the difference between saving and investing. Saving is the amount of money saved…
Q: The DPBP is ideal as a stand-alone measure of economic worth. True or False?
A: Discounted Pay-Back Period or DPBP is period in which discounted value of future cash inflows is…
Q: Identify the one true statement. a. The B/C method determines the ratio of the present worth of…
A: Capital Budgeting involves long-term planning and monitoring of capital expenditure, besides…
Q: When comparing multiple mutually exclusive alternatives, select thealternative that __________ the…
A: Selection of alternatives is based on future time value of money, the alternative with more net…
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- REPLACEMENT CHAIN The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A costs 8.9 million but will provide after-tax inflows of 4.5 million per year for 4 years. If Machine A were replaced, its cost would be 9.8 million due to inflation and its cash inflows would increase to 4.7 million due to production efficiencies. Machine B costs 13.9 million and will provide after-tax inflows of 4.3 million per year for 8 years. If the WACC is 9%, which machine should be acquired? Explain.EQUIVALENT ANNUAL ANNUITY A firm has two mutually exclusive investment projects to evaluate; both can be repeated indefinitely. The projects have the following cash flows: Time Cash Flow X Cash Flow Y 0 100,000 70,000 1 30,000 30,000 2 50,000 30,000 3 70,000 30,000 4 30,000 5 10,000 Projects X and Y are equally risky and may be repeated indefinitely. If the firms WACC is 12%, what is the EAA of the project that adds the most value to the firm? (Round your final answer to the nearest whole dollar.)CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS Project S requires an initial outlay at t = 0 of 17,000, and its expected cash flows would be 5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of 30,000, and its expected cash flows would be 8,750 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend? Explain.
- Q1 A company is considering an investment proposal which has in investment outlay of RO 50,000. The project has a life of 5 years with a salvage value of RO 4,000. The Project is expected to generate profit after tax (PAT) of RO 5,000, RO 8,000, RO 9,000, RO 8,000 and RO 7,000 at the end of year 1, 2, 3, 4 and 5 respectively. Advice whether the project is good for investment, using ARR technique if if the minimum expected rate of return is 15%.Q No.1 HASF Inc, has two investment proposals, which have the following characteristics Project A Period Cost Profit after tax Net cash flow 0 15,000 ------ ------- 1 1000 5000 2 1000 4000 4 1000 3000 Project B Period Cost Profit after tax Net cash flow 0 10000 ------- -------- 1 1000 5000 2 1000 5000 3 4000…An investor has $10,000 invested in asset (X). His advisor recommend a new asset ( Y) for investment with following rate of returns and probabilities: X -10 5 15 Total -5 0.04 0.05 0.01 0.1 -10 0.05 0.05 0.05 0.15 Y 0 0.02 0.1 0.08 0.2 15 0.04 0.2 0.06 0.3 25 0.05 0.1 0.1 0.25 Total 0.2 0.5 0.3 1 a.) Do you agree with the advisor recommendation to invest in asset Y? Explain. b.) If the investor able to divide his money and put it in a new portfolio: $5,000 (50%) in asset (X) and $5,000 (50%) in asset (Y). Would you recommend the new portfolio? Explain.
- QUESTION 5Read the information below and answer the following questionsINFORMATIONThe management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each ofwhich requires an initial investment of R2 500 000. The following information is presented to you:PROJECT COS PROJECT TANNet Profit Net ProfitYear R R1 130 000 80 0002 130 000 180 0003 130 000 120 0004 130 000 220 0005 130 000 50 000A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method.5.4 Benefit Cost Ratio of Project Cos (expressed to three decimal places). 5.5 Internal Rate of Return of Project Cos (expressed to two decimal places) USING INTERPOLATION.Using the below informtion answer: 5.1 Payback Period of Project Tan (expressed in years, months and days). 5.2 Net Present Value of Project Tan.5.3 Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places). INFORMATIONThe management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each ofwhich requires an initial investment of R2 500 000. The following information is presented to you: PROJECT COS PROJECT TANNet Profit Net ProfitYear R1 130 000 80 0002 130 000 180 0003 130 000 120 0004 130 000 220 0005 130 000 50 000A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculatedusing the straight-line method.Consider the following two mutually exclusive projects:Year Cash Flow (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?
- Two investments have the following pattern of expected returns:Investment AYear 1 2 3 4 4 (sale)BTCF $5,000 $10,000 $12,000 $15,000 $120,000Investment BYear 1 2 3 4 4 (sale)BTCF $2,000 $4,000 $1,000 $5,000 $180,000Investment A requires an outlay of $110,000 and Investment B requires an outlay of $120,000.a. What is the BTIRR on each investment?b. If the BTIRR were partitioned based on BTCFo and BTCFs what proportions of the BTIRR would be represented by each?c. What do these proportions mean?Q3 7d 7. XYZ Co. is evaluating whether to invest in a project with the following information: Project cost = $950,000 Project life = five years Projected number of units sold per year = 10,000 Projected price per unit = $200 Projected variable cost per unit = 150 Fixed costs per year = $150,000 Required rate of return = 15% Marginal tax rate = 35% Assume straight-line depreciation to zero over five years, and ignore the half-year rule for accounting for depreciation. d. Calculate the Degree of Operating Leverage (DOL) at the cash break-even, accounting break-even, and financial break-even sales quantities.4 You are considering the following investment activity. The facts are the following: Required investment 300,000.00 Discount Rate 9% Life of project 7.00 Years Net income for the project Sales 140,000.00 Expenses Material 25,000.00 Labor 35,000.00 Overhead 15,000.00 Total Expenses 75,000.00 Net Income 65,000.00 What is the NPV of this investment? What is the IRR of this investment? Would you fund this project? Show your work below Year 0 1 2 3 4 5 6 7