Consider the following investment project. Calculate the net future worth of this investment at 11% and determine the acceptability of the investment.QnAn0- $76,00027,50028,50020,70020,70026,000Single PaymentCompound PresentEqual Payment SeriesSinking PresentFundAmountWorthWorthFactorFactorFactorFactor(F/P, i, N)(P/F, i, N)(A/F, i, N)(P/A, i, N)1.11000.90091.00000.90091.23210.81160.47391.71251.36760.73120.29922.44371.51810.65870.21233.10241.68510.59350.16063.69591.87040.53460.12644.23052.07620.48170.10224.71222.30450.43390.08435.146192.55800.39090.07065.5370102.83940.35220.05985.8892The net future worth of this investment will be $ thousand.AWNIN1234567812345CompoundAmountFactor(F/A, i, N)1.00002.11003.34214.70976.22787.91299.783311.859414.164016.7220CapitalRecoveryFactor(A/P, i, N)1.11000.58390.40920.32230.27060.23640.21220.19430.18060.1698

Future value can be referred to as the value of an underlying asset or security at a future date.…

Consider the following investment project. Calculate the net future worth of this investment at 11% and determine the acceptability of the investment. n An 0 - $76,000 1 27,500 28,500 20,700 20,700 26,000 Single Payment Compound Present Equal Payment Series Sinking Present Fund Factor Amount Worth Worth Capital Recovery Factor Factor Factor Factor (F/P, i, N) (P/F, i, N) (A/F, i, N) (P/A, i, N) (A/P, i, N) 1.1100 0.9009 1.0000 0.9009 1.1100 1.2321 0.8116 0.4739 1.7125 0.5839 1.3676 0.7312 0.2992 2.4437 0.4092 1.5181 0.6587 0.2123 3.1024 0.3223 1.6851 0.5935 0.1606 3.6959 0.2706 1.8704 0.5346 0.1264 4.2305 0.2364 0.4817 0.1022 4.7122 0.2122 2.0762 2.3045 0.4339 0.0843 5.1461 0.1943 2.5580 0.3909 0.0706 5.5370 0.1806 10 2.8394 0.3522 0.0598 5.8892 0.1698 The net future worth of this investment will be $ thousand. GAWNIN 2 3 4 5 6789 2345 Compound Amount Factor (F/A, i, N) 1.0000 2.1100 3.3421 4.7097 6.2278 7.9129 9.7833 11.8594 14.1640 16.7220

Consider the following investment project. Calculate the net future worth of this investment at 11% and determine the acceptability of the investment. n An 0 - $76,000 1 27,500 28,500 20,700 20,700 26,000 Single Payment Compound Present Equal Payment Series Sinking Present Fund Factor Amount Worth Worth Capital Recovery Factor Factor Factor Factor (F/P, i, N) (P/F, i, N) (A/F, i, N) (P/A, i, N) (A/P, i, N) 1.1100 0.9009 1.0000 0.9009 1.1100 1.2321 0.8116 0.4739 1.7125 0.5839 1.3676 0.7312 0.2992 2.4437 0.4092 1.5181 0.6587 0.2123 3.1024 0.3223 1.6851 0.5935 0.1606 3.6959 0.2706 1.8704 0.5346 0.1264 4.2305 0.2364 0.4817 0.1022 4.7122 0.2122 2.0762 2.3045 0.4339 0.0843 5.1461 0.1943 2.5580 0.3909 0.0706 5.5370 0.1806 10 2.8394 0.3522 0.0598 5.8892 0.1698 The net future worth of this investment will be $ thousand. GAWNIN 2 3 4 5 6789 2345 Compound Amount Factor (F/A, i, N) 1.0000 2.1100 3.3421 4.7097 6.2278 7.9129 9.7833 11.8594 14.1640 16.7220

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 7P

See similar textbooks

Similar questions

Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Comparing Investment Criteria [L01,2,3,5,7] Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$300,000 -$40,000 1 20,000 19,000 2 50,000 12,000 3 50,000 18,000 4 390,000 10,500 Whichever project you choose, if any, you require a 15 per cent return on your investment. a. If you apply the payback criterion, which will you choose? Why? b. If you apply the discounted payback criterion, which investment will you choose? Why? c. If you apply the NPV criterion, which investment will you choose? Why? d. If you apply the IRR criterion, which investment will you choose? Why? e. If you apply the profitability index criterion, which investment will you choose? Why? f. Based on your answers in (a) through (e), which project will you finally choose? Why? Please explain your calculations and conclusions
Calculate the HPR of the following investment, entered as a percentage (Example: if your answer is 14.5%, enter 14.5 and not 0.145) Period Cashflow 0 -14100 1 3300 2 3300 3 3100 4 2800
Consider the following two mutually exclusive projects: YEAR CASH FLOW (A) CASH FLOW (B)0 -$300,000 -$39,0001 20,000 18,0002 70,000 12,0003 80,000 18,0004 400,000 19,000 Whichever project you choose, if any, you require a 15 percent return on your investment.i) If you apply the payback period (PBP) criterion, which investment will you choose? Why?ii) If you apply the net present value (NPV) criterion, which investment will you choose? Why?iii) If you apply the profitability index (PI) criterion, which investment will you choose? Why?iv) If you apply the internal rate of return (IRR) criterion, which investment will you choose?Why?v) Based on your answers in (i) through (iv), which project will you finally…
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 491,000 –$ 92,000 1 114,000 52,000 2 134,000 36,000 3 79,000 33,500 4 474,000 28,600 Whichever project you choose, if any, you require a 15% return on your investment. What is the IRR for each project? (Round the final answers to 2 decimal places.) If you apply the IRR criterion, which investment will you choose? Project A Project B What is the profitability index for each project? (Do not round intermediate calculation. Round the final answers to 3 decimal places.) Project A Project B If you apply the profitability index criterion, which investment will you choose? Project A Project B Based on your answers in (a) through (e), which project will you finally choose? Project A Project B
Calculate the APR of the following investment, entered as a percentage (Example: if your answer is 14.5%, enter 14.5 and not 0.145) Year Number Cashflow 0 -11000 1 3000 2 3500 3 2900 4 2800
What is the NPV of the following project if the discount rate is 11%? Round to the nearest cent.Investment today: $-121,000; Cash flow in year 1: $66,000; Cash flow in year 2: $72,000; Cash flow in year 3: $66,000
Calculate the EAR of the following investment, entered as a percentage (Example: if your answer is 0.145, enter 14.5) Year Number Cashflow 0 -11400 1 3500 2 3000 3 3100 4 2800 Your Answer:
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?
The following information regarding an investment project is available. Discount rate 7% Year Cash Flow 0 (£125,000) 1 £60,000 2 £50,000 3 £10,000 4 £10,000 5 £50,000 A). What is the IRR of the Project - (Hint: Use interpolation formula)? Choose one from the following: A. 9% B. 12% C. 16% D. 25%
Consider the following investment project: n An I0 -$8,500 9%1 $4,400 12%2 $4,400 10%3 $1,500 13%4 $3,500 12%5 $4,300 10%Suppose, as shown in the preceding table, that the company's reinvestment opportunities (that is, its MARR) change over the life of the project. For example, the company can invest funds available now at 9% for the first year, 12% for the second year, and so forth. Calculate the net present worth of this investment, and determine its acceptability.