2. If the discount rate is 10%, the net present value of project b?3. The payback period pf project C?4. If the discount rate is 5% and the discounted payback period of project D is exactly 2yrs, then year 2 cash inflow for project D is? An organization has four investment proposals with the following costs andexpected cash inflows:Expected cash inflowsEnd ofEnd ofEnd ofYear 2Year 3ProjectACostYear 110,00010,00010,000Unknown10,00015,0005,00020,000Unknown20,00025,00030,00010,0005,00015,00020,000Additional InformationPresent Value of P1Present value of anDiscount Number ofPeriodsAnnuity of P1 per Periodsfor n Periods (PVIFA)0.9524Due at the End ofRaten Periods (PVIF)5%0.95245%0.90701.85945%30.86382.723210%0.90910.909110%20.82641.735530.75132.486910%0.86960.869615%0.75611.625715%0.65752.283215%If Project A has an internal rate of return (IRR) of 15%, it has a cost ofIBCD

Net present value is the difference between the present value of cash flow and initial investment.

the discount rate is 10%, the net present value of project b? 3. The payback period pf project C? 4. If the discount rate is 5% and the discounted payback period of project D is exactly 2yrs, then year 2 cash inflow for project D is?

the discount rate is 10%, the net present value of project b? 3. The payback period pf project C? 4. If the discount rate is 5% and the discounted payback period of project D is exactly 2yrs, then year 2 cash inflow for project D is?

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 4MAD

See similar textbooks

Related questions

Q: Use the following information to answer questions 11-15: A firm evaluates a project with the…

A: Net Present Value Net present value (NPV) is the present value of cash flows. It is the difference…

Q: A company is considering two projects. The discount rate is 10 percent, and the projects' cash flows…

A: IRR is the rate at which NPV is zero

Q: Consider a project with the following cash flows: Year Cash Flow - 8000 1 3200 2 3200 3 3200 4 3200…

A: Capital budgeting techniques are used to analyze the profitability of long term projects and…

Q: Following table shows the initial investment required in and cash flow (return) from a project…

A: Capital Budgeting Techniques are used to choose the most profitable investment alternative. Based on…

Q: heinhardt Wig Company is considering a project that has the cash flows: Year Project Cash…

A: Discounted payback period = years before discounted payback period + (cumulative cash flow in the…

Q: alculate the NPV of project X

A: It refers to the long term investment decisions that has been taken by the top management of a…

Q: question 2

Q: Project L requires an initial outlay at t = 0 of $30,000, its expected cash inflows are $8,000 per…

A: Discounted Payback Period = Years before full recovery + (unrecovered cost at the start of the year/…

Q: A certain investment will require an immediate cash outflow of $4m. At the end of each ofthe next 4…

A: PART A & B:Calculation of Net Present Value:The real interest rate of 5% in Part B is calculated…

Q: At what discount rate does the following project have a positive NPV of exactly $1,000?

A: Net present value (NPV) of an alternative/project refers to the variance between the initial…

Q: Compute the discounted payback statistic for Project D if the appropriate cost of capital is 11…

A: The payback period is calculated as the length of time taken to recover the initial cost.

Q: (Use Excel) PT BCG is considering a project with an initial cash outlay of $100,000 and an expected…

A: Initial Outlay = 100,000 Cash flow = 25,000 N = 6 Discount Rate = 10℅

Q: Suppose a project with a 6% discount rate yields R5000 for the next three years. Annual operating…

A: NPV is the first priority rule.

Q: Wells Inc., has identified an investment project with the following cash flows. Year…

A: The future value calculation is an important tool of financial management. In future value…

Q: A company is considering two projects. The discount rate is 10 percent, and the projects' cash flows…

A: NPV =Present Value of Future Cash Flows - Initial Investment IRR is the rate at which Present Value…

Q: Consider a project with the following cash flows: End of Year (n) Cash Flows ($)0…

A: Capital budgeting indicates the evaluation of the profitability of possible investment and projects…

Q: Compute the discounted payback statistic for project C if the appropriate cost of capital is 7% and…

A: Discounted Payback(PB) Period shows the time period in which present values(PV) of all cash inflows…

Q: Consider a project with the cash flow as depicted in Table 1: The discount rate for this project is…

A: Formulas:

Q: A project has the following cash flows : Year Cash Flows -$12,400 5,530 7,990 5,360 4. -1,500…

A: The capital budgeting technique is used for the purpose of evaluating different projects in order to…

Q: You are considering two mutually exclusive projects with the following cash flows. The discount rate…

A: Pay back period is the amount of years required to recover the initial investment of the project and…

Q: Consider a project with the following cash flows: Year Cash Flow - 10000 1 5000 5000 3 5000 4 5000…

A: Discount Rate = 15% Time Period = 4 Years

Q: a) The cost of a proposed project is $10,000 and has annual cash flows pf $2,900 for six years. a.…

A: The discounted payback period is the time period in which the project will recover the initial cash…

Q: 1. A 4-year financial project has net cash flows of $20,000; $25,000; $30,000; and $50,000 in the…

A: Net Present Value: Cash inflows and outflows over a period of time are summed up to arrive at the…

Q: What’s the discount payback period of the projects? (compile a spreadsheet) Calculate NPV, PI, IRR ,…

A: Capital investments are long-term investments in which the assets involved have useful lives of…

Q: 4f

A: Payback period is the periods required to collect the initial amount from a capital project. Payback…

Q: BECL Ltd is considering a project, which will involve the following cash inflows and (out)flows:…

A: Net Present Value The net present value method is the method of capital budgeting based upon the…

Q: Compute the discounted payback statistic for Project D if the appropriate cost of capital is 11…

Q: The project NPV is 14.95. The initial investment 15m. The discount rate is 4.5% per annum. What is…

A: The payback period is one of the capital budgeting techniques which is only used to estimate the…

Q: An alternative has the following cash flows: Benefits of $50,000 per year; Disbenefits of $27,000…

A: The ratio that is used to determine the excess benefits of an alternative over the costs associated…

Q: What is the NPV of the following project if the discount rate is 11%? Round to the nearest…

A: NPV refers to net present value of an investment or a project. It is used in capital budgeting.

Q: The following table gives the cash flows for Project A and Project B: Year Project A Project B -3000…

A: You should invest in the project with higher NPV

Q: f a project requires an initial current investment of £200 and promises to raise £133.1 after three…

A: Current investment = £200 Cash inflow after 3 years = £133.1 Interest rate = 10% Present value of…

Q: A company is considering two projects. The discount rate is 10 percent, and the projects' cash flows…

A: Net present value (NPV) is the difference between the present value of cash inflows and cash…

Q: You are considering a project with an initial cost of P7.8M. Find the payback period and the NPV for…

A: Decisions regarding long-term investments are known as capital budgeting. The process of selecting…

Q: A project has expected cash inflows starting with year 1 of $2,200; $2,900; $3,500; and finally in…

A: Given information: Expected cash flows are $2,200, $2,900, $3,500 and $4,000 Profitability index is…

Q: A) What are disadvantages of Payback Period method used in capital budgeting? B) A project has…

A: The determination procedure is speedier than and easy than some the other capital budgeting…

Q: Calculating Discounted Payback An investment project costs $15,100 and has annual cash flows of…

A: Discounted Payback Period = Years before full recovery + (unrecovered cost at the start of the year/…

Q: You are considering a project that costs OMR600 and has expected cash flows of OMR224, OMR250.88 and…

Q: The project’s payback is 1.5 years, and it has a weighted average cost of capital of 10 percent.…

A: WACC = 10% Year Cash Flow 0 1 400 2…

Q: Consider a project with the following cash flows: Year Cash Flow - 8000 1 4000 2 4000 3 4000 4 4000…

A: Payback period is The length of time required for an investment to generate cash flows sufficient to…

Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

2. If the discount rate is 10%, the net present value of project b? 3. The payback period pf project C? 4. If the discount rate is 5% and the discounted payback period of project D is exactly 2yrs, then year 2 cash inflow for project D is?

An organization has four investment proposals with the following costs and
expected cash inflows:
Expected cash inflows
End of
End of
End of
Year 2
Year 3
Project
A
Cost
Year 1
10,000
10,000
10,000
Unknown
10,000
15,000
5,000
20,000
Unknown
20,000
25,000
30,000
10,000
5,000
15,000
20,000
Additional Information
Present Value of P1
Present value of an
Discount Number of
Periods
Annuity of P1 per Periods
for n Periods (PVIFA)
0.9524
Due at the End of
Rate
n Periods (PVIF)
5%
0.9524
5%
0.9070
1.8594
5%
3
0.8638
2.7232
10%
0.9091
0.9091
10%
2
0.8264
1.7355
3
0.7513
2.4869
10%
0.8696
0.8696
15%
0.7561
1.6257
15%
0.6575
2.2832
15%
If Project A has an internal rate of return (IRR) of 15%, it has a cost of
IBCD

Definition Definition Transfer of funds into a company by any third party, which may happen due to any operational, investing, and financing activities. The cash inflow includes payments made by customers or investments made by the investors into the company by purchasing its equity.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Assume San Lucas Corporation in MAD 26-1 assigns the following probabilities to the estimated annual net cash flows: a. Compute the expected value of the annual net cash flows. b. Determine the expected net present value of the equipment, assuming a desired rate of return of 10% and the expected annual net cash flows computed in part (a). Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Based on your results in parts (a) and (b), should San Lucas Corporation invest in the equipment?
Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two, $2,500 in year three, $3,000 in year four and $2,000 in year five. What is the NPV using 8% as the discount rate?
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
Assume Home Garden Inc. in MAD 26-5 assigns the following probabilities to the estimated construction cost of the warehouse and annual net cash flows: a. Compute the expected value of the construction cost. b. Compute the expected value of the annual net cash flows. c. Determine the expected net present value of building the distribution warehouse, assuming a desired rate of return of 14% and using the expected values computed in parts (a) and (b). Use the present value tables provided in Appendix A. Round to the nearest dollar. d. Based on your results in part (c), should Home Garden Inc. build the distribution warehouse?