Q: Define risk-adjusted cost of capital (r)
A: Risk adjusted cost of capital is the measure of returns of a project relative to the risks of a…
Q: Define then discuss Value-at-Risk.
A: The stock market is full of new policies and procedures. It get impacted by change in the government…
Q: the future value
A: Introduction: Ordinary annuity is an annuity in which the payments are made at the end of a…
Q: i. The net present value ii. The internal rate of return commend the decision to be made
A: Since in the given case the IRR is higher in machine 1 so it is to be selected. Assumptions: We…
Q: ORTH METHO
A: Annual Worth is uniformly equivalent AW of all estimated income and costs during the lifetime of a…
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: What is the significance of the Value at Risk (VaR) method?
A: The question is based on the concept of Value at Risk (VaR). VaR is a statistical measure of risk in…
Q: future value
A: Future value is the value of money or asset in the future. It is very important to investors and…
Q: future worth
A: EOY Cash flows FV factor @20% Future value 0 (2,000,000.00)…
Q: What is net present value?
A:
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: Which of the following terms accurately describe what a resource is worth in its next- best use. a.…
A: In this question the factor which describes the best worth of resources is asked. We will analyse…
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 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: What is current market value? Describe about it.
A: Market value: Market value is the price at which, both seller and buyer agree to exchange the…
Q: Explain risk-neutral valuation
A: A risk-neutral valuation is a probability measure used to help pricing derivatives and other…
Q: how present value is useful in economic decision making
A: Present value (PV) is the current value of a future sum of money or a stream of cash flows, given a…
Q: e present value and future v
A: Given information : Quarterly payments 2000 Time period (years) 5 Interest rate 6.50% The…
Q: Explain the net present value formula and also explain what the net present value represents.
A: Net present value:- Net present value is the investment evaluation technique, where we evaluate…
Q: Define net realization value?
A: Net realizable value means the amount that could be received after deducted all incidental expenses…
Q: What is net present value (NPV) profile?
A: Net present value profile is mainly the graphical representation of net present value of different…
Q: PROVIDE - PRESENT VALUE, FUTURE VALUE, AND internal rate of return (IRR)
A: Present and Future Value: The current value of a cash flow that is expected to occur at some time in…
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: choose the best alternative A or B using net present worth method ?
A: The net present value is one of the modern methods used for evaluating the feasibility of a…
Q: compare Future Value and Present Value?
A: The comparison between present value and future value is as follows:
Q: / Risk and Return
A: There are 3 things given in the question and asked for an explanation of only 1. Risk and Return…
Q: What are some possible financial decisions in which using the Future Value (FV) formula might be…
A: The concept of time value of money states that the money received today is worth more than that the…
Q: Describe relationship between risk and profitability.
A: Risk and profitability have direct relation. Lower the risk, lower is the return and Higher the…
Q: Define the term Equivalent worth-calculation?
A: To define the term Equivalence worth calculation.
Q: Can we consider Project Risk by Discount Rate?
A: The discount rate is an interest rate that is used in computing the present value of the future cash…
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: 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: The present value that must be invested
A: Interest charged on the principal amount at a fixed rate for a fixed period of time is known as…
Q: Define risk-free asset?
A: Risk-free means that anything which does not have any kind of risk associated with it. They are free…
Q: Determine the present worth of the series. Determine the future worth
A: Present Value = Cash Flow(1+i)n Future Value = Cash Flow x (1+i)n where, i= Interest rate n= period
Q: Present Value versus Future Value
A: Present value is the amount at time "t=0". This is the value of an investment today or in present…
Q: Discuss the advantages and disadvantages of the Net present value
A: Net present value is the method of capital budgeting that helps in determining the present value of…
Q: Discuss and critically evaluate the relationship between risk and return. Discuss and critically…
A: Risk is measured by variability in returns.Higher the variability higher the risks under the…
Q: What is the relationship between risk and return?
A: Risk return relationship: The association among risk and return is recognized as the risk-return…
Q: the market value of A
A: In this case of borrowing we buy cap from market at swap rate, if market interest rate is increased…
Q: What is value at risk, VaR?
A: Value at Risk (VaR) is a financial metric that estimates the risk of an investment. More…
Q: Define conditional value at risk (CVaR)
A: The question is based on the concept of conditional value at risk , it is a risk assessment process.…
Q: What is net present value? How does net preset value work?
A: Net present value:- Net present value is the investment evaluation technique, where we evaluate…
Q: How can we Consider Project Risk by Discount Rate?
A: In corporate finance, a discount rate is the rate of return used to discount future cash flows back…
Q: Define value at risk (VaR)
A: Risk is referred as uncertainty or loss. Financial risk is referred as the variability of actual…
Step by step
Solved in 2 steps with 2 images
- Giorgio Co. is looking at an investment project with an internal rate of return of 10.8%. The initial outlay for the investment is $90,000. The hurdle rate or minimum acceptable rate of return is 10.2%.Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.Markoff Products is considering two competing projects, but only one will be selected. Project A requires an initial investment of $42,000 and is expected to generate future cash flows of $6,000 for each of the next 50 years. Project B requires an initial investment of $210,000 and will generate $30,000 for each of the next 10 years. If Markoff requires a payback of 8 years or less, which project should it select based on payback periods?
- 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?For the following table, assume a MARR of 15%per year and a useful life for each alternative of eightyears which equals the study period. The rank-orderof alternatives from least capital investment to greatestcapital investment is Z → Y → W → X. Completethe incremental analysis by selecting the preferredalternative. “Do nothing” is not an option. (6.4)FE PRACTICE PROBLEMS 307Z → Y Y → W W → X! Capital −$250 −$400 −$550investment! Annual cost 70 90 15savings! Market 100 50 200value! PW(15%) 97 20 ???(a) Alternative W (b) Alternative X(c) Alternative Y (d) Alternative ZThe following mutually exclusive investment alternatives have been presented to you.Complete the following analysis of cost alternatives and select the preferred alternative. The study period is 10 years and the MARR=15%per year. "Do Nothing" is not an option. A B C D Capital investment $15,000 $15,900 $13,500 $18,000 Annual costs 240 310 450 90 Market value at EOY 10 900 1,250 1,750 2,000 FW (15%) −$64,656 −$69,369 ??? −$72,647 The FW of the alternative C is ... nothing.(Round to the nearest dollar.) Select the preferred alternative. Choose the correct answer below. A. Alternative D B. Alternative B C. Alternative C D. Alternative A
- Flextire Manufacturing is considering two mutually exclusive proposals. Each will cost $80,000 and will last 6 years. Cash flows and estimated probabilities are presented below. Based on an MARR of 10%, use decision tree analysis to determine which proposal Flextire should consider. Proposal A Proposal B Benefits per year Benefits per year Probability $18,000 $17,500 Conservative= 0.40 20,000 20,500 Most likely= 0.35 23,000 23,000 Optimistic= 0.25 Write a brief interpretation of your answer.Tomodachi Co plans to invest in either Projects M or N which are described below. The company's cost of capital is 15%, the market return is 15% and the risk-free rate is 5%. The beta for project M is 1.20 and the beta for project N is 1.40. What is the NPV for Project M when using the risk-adjusted discount rate method of project evaluation? Initial Investment Project M $700,000 Project N $780,000 Year 1 $300,000 $220,000 2 $300,000 320,000 3 $300,000 380,000 4 $300,000 460,000 or You must decide firm which of the proposed projects should be accepted for the upcoming year since only $6 million is available. Which projects should be accepted?Juniper Corporation is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $810,000 $466,000 Useful life 8 years 8 years Estimated annual net cash inflows for 8 years $130,000 $70,000 Residual value $58,000 $− Depreciation method Straight−line Straight−line Required rate of return 13% 10% What is the accounting rate of return for Proposal X? (Round any intermediary calculations to the nearest dollar, and round your final answer to the nearest hundredth of a percent, X.XX%.)
- You are evaluating an investment project, which has a cost of $161,000 today and is expected to provide after-tax annual cash flows of $20,000 for seven years. In order to compute the MIRR, you are modifying the cash flows. Assuming the cost of capital is 9.1 percent, what is the terminal cash flow of the modified cash flows? Question 12 options: $173,074 $176,474 $178,474 $180,974 $182,874 $184,574Suppose 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 14 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively. Time 0 1 2 3 4 5 6 Cash Flow −1,010 110 490 690 690 290 690 Use the payback decision rule to evaluate this project; should it be accepted or rejected? Multiple Choice 4.00 years, reject 0 years, accept 2.59 years, reject 1.16 years, acceptPlease show calculations and stepwise, dont copy pls. Investment options A and B are equally risky and have identical initial costs. Each investment will produce cash inflows of $20,000. Option A will pay five annual payments, starting in 1 year, of $4,000 each. Option B will pay $8,000 the first year followed by four annual payments of $3,000 each. Which one of the following statements is correct given these two investment options? Assume a positive rate of return. A) Neither investment should be undertaken. B) Option A is the better investment. C) Option B has a higher net present value. D) Option B has a lower future value at Year 5. E) Both options are of equal value..