T NormalT No Spac. Heading 1Heading 2FontTitleSLParagraphStylesMs. Rahat hails from a business family. She is considering starting a supermarketwith an investment of OMR 100,000. She has provided the following informationabout two possible locations to start the supermarket. Her family had advised toaccept the project which recovers the funds within 3 yearsParticularsSupermarket at Maabela Supermarket at Al Ansab100,000 OMRInitial Investment100,000 OMRCost of capital10%12%Year 140,00060,000Year 250,00040,00040,00020,000Year 3Evaluate the above offers using the investment evaluation techniques mentionedbelow without using Excel and mentioning the steps..: All calculations steps are tobe provideda- Pay-back periodb- Discounted Pay-back periodC- Internal Rate of Return (IRR)d- Modified Internal Rate of Return (MIRR)e- Based on the above analysis and based on the relevant literature reviewabout the techniques used to analyse the projects, which project would yourecommend and why

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Styles Ms. Rahat hails from a business family. She is considering starting a supermarket with an investment of OMR 100,000. She has provided the following information about two possible locations to start the supermarket. Her family had advised to accept the project which recovers the funds within 3 years Particulars Supermarket at Maabela Supermarket at Al Ansab 100,000 OMR Initial Investment 100,000 OMR Cost of capital 10% 12% Year 1 40,000 50,000 40,000 60,000 40,000 20,000 Year 2 Year 3 Evaluate the above offers using the investment evaluation techniques mentioned below without using Excel and mentioning the steps.: All calculations steps are to be provided a- Pay-back period b- Discounted Pay-back period C- Internal Rate of Return (IRR)

Styles Ms. Rahat hails from a business family. She is considering starting a supermarket with an investment of OMR 100,000. She has provided the following information about two possible locations to start the supermarket. Her family had advised to accept the project which recovers the funds within 3 years Particulars Supermarket at Maabela Supermarket at Al Ansab 100,000 OMR Initial Investment 100,000 OMR Cost of capital 10% 12% Year 1 40,000 50,000 40,000 60,000 40,000 20,000 Year 2 Year 3 Evaluate the above offers using the investment evaluation techniques mentioned below without using Excel and mentioning the steps.: All calculations steps are to be provided a- Pay-back period b- Discounted Pay-back period C- Internal Rate of Return (IRR)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are a young personal financial adviser. Molly, one of your clients approached you forconsultation about her plan to save aside $450,000 for her child’s higher education in UnitedStates 15 years from now. Molly has a saving of $120,000 and is considering different alternativeoptions:Investment 1: Investing that $120,000 in a saving account for 15 years. There are two banks forher choice. Bank A pays a rate of return of 8.5% annually, compounding semi-annually. Bank Bpays a rate of return of 8.45 annually, compounding quarterly.Investment 2: Putting exactly an equal amount of money into ANZ Investment Fund at the endof each month for 15 years to get 330 000 she still shorts of now. The fund is offering a rate ofreturn 7% per year, compounding monthly.Required:d) Calculate the monthly payment Molly needs to contribute into ANZ Investment Fund to get $330,000 after 15 years in Investment 2? e) In investment 2, if Molly changes to contribute $1200/month to that super fund at the…
You are a young personal financial adviser. Molly, one of your clients approached you forconsultation about her plan to save aside $450,000 for her child’s higher education in UnitedStates 15 years from now. Molly has a saving of $120,000 and is considering different alternativeoptions:Investment 1: Investing that $120,000 in a saving account for 15 years. There are two banks forher choice. Bank A pays a rate of return of 8.5% annually, compounding semi-annually. Bank Bpays a rate of return of 8.45 annually, compounding quarterly.Investment 2: Putting exactly an equal amount of money into ANZ Investment Fund at the endof each month for 15 years to get 330 000 she still shorts of now. The fund is offering a rate ofreturn 7% per year, compounding monthly.Required:a) How much is the annual interest rate, assuming compounding annually Molly should aim at ifshe chooses to invest her $120 000 in a saving account to get the $450,000 ready in just 10 yearsfrom now?b) Calculate the monthly…
You are a young personal financial adviser. Molly, one of your clients approached you forconsultation about her plan to save aside $450,000 for her child’s higher education in UnitedStates 15 years from now. Molly has a saving of $120,000 and is considering different alternativeoptions:Investment 1: Investing that $120,000 in a saving account for 15 years. There are two banks forher choice. Bank A pays a rate of return of 8.5% annually, compounding semi-annually. Bank Bpays a rate of return of 8.45 annually, compounding quarterly.Investment 2: Putting exactly an equal amount of money into ANZ Investment Fund at the endof each month for 15 years to get 330 000 she still shorts of now. The fund is offering a rate ofreturn 7% per year, compounding monthly.Required:a) Identify which Bank should Molly choose in Investment 1 by computing the effective annualinterest rate (EAR)? b) Calculate the amount of money Molly would accumulate in Investment 1 after 15 years if shechooses Bank B? c) How…
You are a young personal financial adviser. Molly, one of your clients approached you forconsultation about her plan to save aside $450,000 for her child’s higher education in UnitedStates 15 years from now. Molly has a saving of $120,000 and is considering different alternativeoptions:Investment 1: Investing that $120,000 in a saving account for 15 years. There are two banks forher choice. Bank A pays a rate of return of 8.5% annually, compounding semi-annually. Bank Bpays a rate of return of 8.45 annually, compounding quarterly.Investment 2: Putting exactly an equal amount of money into ANZ Investment Fund at the endof each month for 15 years to get 330 000 she still shorts of now. The fund is offering a rate ofreturn 7% per year, compounding monthly.Required:a) Identify which Bank should Molly choose in Investment 1 by computing the effective annualinterest rate (EAR)?b) Calculate the amount of money Molly would accumulate in Investment 1 after 15 years if shechooses Bank B?
Dawn is preparing a home office to perform subcontract projects for midsized architect firms. She plans to use $13,000 of her own funds, which currently generate a return of 4% per year. The remainder of financing will be provided by a $9,000 bank loan carrying a 9% per year interest rate. She hopes to realize a return of 3% above the average cost of capital to establish her office, and she realizes that the factors of inflation and risk should also be considered. Her decision is to add another 1.5% per year to compensate for these elements. What is the MARR she should use when evaluating projects? the Marr she should use is __%
A) Good decision making in business goes a long way to ensure long term success andsurvival amidst the cutthroat competition that one faces. Do an analysis of the three mostimportant financing decisions that are taken – examine the main features of such decisionsand also evaluate the factors that affect the respective decisions. 4 B) Let’s say you are considering investing in a popcorn business. The popcorn machinecosts $1000. The Cash flows for 5 years are given below: CF0 -$1000CF1 $100CF2 $500CF3 $200CF4 $400CF5 $300 Given rate of interest at 9%, calculate the Net present Value of the above business.
John Benson and Jerry Chen, the owners of J&J Bagel, Inc., have decided that it is time to acquirea bigger store to expand their operations. John and Jerry have identified a suitable structure that iscurrently for sale, and they believe they can buy and refurbish it for about $2.2 million. John and Jerry arenow ready to meet with Charlene Mons, the loan officer for Blue Hills Bank. The meeting is to discussthe mortgage options to the company to finance the new store.Charlene begins the meeting by discussing a 30-year mortgage. The loan would be repaid in equalannual installments. Because of the previous relationship between J&J Bagel and the bank, there wouldbe no closing costs for the loan. Charlene states that the interest rate of the loan would be 7 percent. Johnasks if a shorter mortgage loan is available. Charlene says that the bank does have a 15-year mortgageavailable at the same interest rate.Jerry decides to ask Charlene about a “bullet loan” he discussed with a…
Your neighborhood laundromat is for sale and a friend is considering investing in this business. Your friend has asked for your financial advice regarding this endeavor. For the business alone and no other assets (such as the building and land), the purchase price is $250,000. The net cash flows for the project are $30,000 per year for the next 5 years. The plan is to borrow the money for this investment at 6%. You will need to submit a presentation sharing your recommendation and you must address the following questions:Part A: Calculate the Net Present Value and Payback Period: What is the net present value of this project? Calculate the simple payback period for this project. Your desired payback period is 5 years. How long is the payback period for this project? Use the following template to complete the Unit 4 Excel spreadsheet (IP): Unit 4 IP Assignment Template Part B: Evaluate the investment and provide calculations for an alternative deal: How would you evaluate this…
After four challenging yet fruitful years, you just graduated from college. Your parents gave you P150,000 cash as a graduation gift and advised you to put it in a savings account to earn a 10% rate of return for 4 years. However, being a pet lover, you went to the pet shop and bought a pair of pet dogs worth P150,000. What is the best estimate of the opportunity cost for this decision? (Use 4 decimals for FV factors) a. 0 b. 69,615 c. 60,000 d. 198,075
ary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are: Cost of equipment $ 175,000 Working capital needed $ 185,000 Annual cash inflow from sales $ 190,000 Annual cash outflow for operating costs $ 145,000 Salvage value of equipment $ 20,000 Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the present value factor you will use for the net annual cash flows?
Mary is considering opening a hobby and craft store. She plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the NPV of this venture? Cost of equipment $335,000 Working capital needed $185,000 Annual cash inflow from sales $195,000 Annual cash outflow for operating costs $115,000 Overhaul (repair) of equipment in year 3 $17,500 Salvage value of equipment $20,000
Juanita has an opportunity to invest in her friend's clothing store. The initial investment is $10,200 and the expected annual cashflows thereafter are {$300; $700; $1,300; $2,000; $2,000; $5,000; $5,000}. What is Juanita's IRR on this investment?

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