Answered: 13. The IBC Company is considering…

Quickbooks Online Accounting

3rd Edition

ISBN:9780357391693

Author:Owen

Publisher:Owen

Chapter8: Budgets And Bank Reconciliations

Section: Chapter Questions

Problem 3.5C

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Transcribed Image Text:A. Bookshelf - The Capital Budget x 1 VitalSource Bookshelf: The Cap x b My Questions | bartleby Week 2 Assignment G The IBC Company is consideri + A online.vitalsource.com/#/books/9781135656232/cfi/6/24!/4/272/10/22/2/2/2/2@0:43.3 Copy URL -10,000 6,151 $6,151 B 4. Mutually Exclusive... -10,000 13,226 Go to 4. Mutually Exclusive Investments b. Compute the amount the investor will have at time 2 if the funds received at time 1 can be reinvested to earn 0.15. C. For each of the three investments, graph the present value profile. d. Which investment is to be preferred if the rate of discount is 0.10? Reinvestment rate of return 12. The ABC Company is considering undertaking an investment that promises to have the following cash flows: period 0, -$50; period 1, $90. If the firm waits a year, it can invest in an alternative (that is, mutually exclusive) investment that promises to pay -$60 in period 1 and $100 in period 2. Assume a time value of money of 0.05. Which investment should the firm undertake? Use the net present value and the internal rate of return methods. 13. The IBC Company is considering undertaking an investment that promises to have the following cash flows: Loan-type flows Multiple internal rates of return Perlod 0 Perjod 1 Perlod 2 Perlod 3 Interpretation of multiple IRRS -$100 $150 $50 $50 A "paradox" If it waits a year, it can invest in an alternative (that is, mutually exclusive) investment that promises to pay Period 1 -$150 Period 2 $250 Period 3 $50 Converting multiple IRRS to a single IRR Assume a time value of money of 0.05. Which investment should the firm undertake? Use the present value method and the internal rate of return approaches. With the IRR approach, use the incremental cash flows. 14. The Arabian Oil Company is considering an investment that can be undertaken this year or postponed one year. The investment cash flows if the investment is undertaken now would be as follows: period 0, -$100; period 1, $200. The cash flows if it is delayed one period would be as follows: period 1, -$100; period 2, $200. Assume a time value of money of 0.05. Should the company invest now or delay one year? First use the internal rate of return method and then use the net present value method. 15. The IBC Company is considering undertaking an investment that promises the following cash flows: Significance of nonconventional cash flows Ranking independent investments Mutually exclusive alternatives with Period 0 -5100 Period 1 $80 Period 2 $80 different risks Duration: a sensitivity measure If the company waits a year, it can make the following investment: Why the internal rate of return Period 1 Period 9:41 AM P Type here to search 10/1/2020 !

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Today is January 1, 2020. On the first day of the years 2021, 2022, 2023, and 2024, you will invest $12,000. If your expected rate of return is 7% per year, you will have ___________ on January 1, 2025 (rounded to the nearest dollar).

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