With a required rate of return of 17%, the IRR of a standard capital budgeting project is equal to 19%. What does this say about this project’s NPV? Select one: a. The NPV is greater than zero. b. The NPV is equal to zero. c. The NPV is less than zero. d. The NPV is equal to the ratio given by 19% divided by 17%.
Q: You have saved $22,000 for a down payment on a house. Your bank requires a minimum down payment of 1...
A: Down payment amount = $22,000 Down payment ratio = 11%
Q: Lucy bought a house for $100,000. Lucy's annual cost of ownership net of tax savings is exactly equa...
A: IRR of a project is the rate of return at which the net present value of the project becomes zero. T...
Q: Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he re...
A: Given Amount needed $45000. Amount available as savings $220,000 Inflation rate is 3% interest rate ...
Q: Big Rock has several investment portfolios with a local mutual fund company. One of the company's di...
A: Portfolio management strategies are the different ways that may be used to manage a portfolio effici...
Q: Survey Corps lends money to improve their equipment, P10,000 due in 2 years, P25,000 due in 3 years,...
A: Given: Year Amount 2 10000 3 25000 5 50000
Q: Sarafina has bonds in her portfolio. She wants to know about her position in the bond market. Specif...
A: Yield to maturity (YTM) is the total return expected on a bond if it is held until it matures. It is...
Q: Calculate the simple interest earned. Round to the nearest cent. P = $3900, r = 5.3%, t = 6 months
A: P = $3900 r = 5.3% t = 6 monnths
Q: P. to determine the regular payment amount, rounded to the nearest dollar. Consider the following pa...
A: A mortgage is a loan usually on a property where the collateral is the property itself.
Q: Describe how NPV is calculated and describe the information this measure provides about a sequence o...
A: NPV net present value is very important factor in deciding the feasibility analysis of projects. It ...
Q: a. Calculate the interest component of Payment 13. Interest b. Calculate the principal component of ...
A: Loan amortization refers to a schedule which is prepared to shows the periodic loan payments, amount...
Q: xactly 140 years ago my great grandmother deposited $190 in a large bank. She forgot all about the d...
A: Here we can use the concept of time value of money. As per the concept money earns interest and henc...
Q: You wish to buy a house. The market value of the house is $650,000 and you have saved $120,000 as a ...
A: Interest Rate = 6.5% Time Period = 26 Years Market Value = $650,000 Down Payment = $120,000
Q: ecrease the per-share book value of the stock held by shareholders b. To increase the per-share p...
A: A share repurchase may have an impact on a company's BVPS. Because BVPS is used to calculate the pri...
Q: Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has h...
A: Payback period is the amount of time required to recover initial investment. Payback period =Initial...
Q: Use to determine the regular payment amount, rounded to the nearest dollar. Consider the following p...
A: The cost of mortgage is equal to the sum of the total cost of interest, closing cost and the cost of...
Q: As a financial manager you are very concerned about the dividend yiled and dividend payout ratioas t...
A: Stock price is defined as the maximum price that an investor is willing to pay for a stock. These pr...
Q: The bonds of a company have a face value of $1,000, pay an annual coupon of 7%, and have 5 years rem...
A: Yield to Maturity Yield to maturity refers to the total return of a bond that is expected by the i...
Q: Suppose the next MMO trade represents a sale of 200 shares at a price that is $0.33 lower than the l...
A: MMO Last trading price is $13.82 MMO Tdaded volume are 0.78K or 780 shares MMO share is up by 1.87% ...
Q: QUESTION 18 Lucy bought a house for $100,000. Lucy's annual cost of ownership net of tax savings is ...
A: Lucy's annual cost of ownership, net of tax savings, is exactly equal to the annual rent she would h...
Q: Suppose you take out a loan for 180 days in the amount of $11,500 at 14% ordinary interest. After 60...
A: Loan amount (PV) = $11500 Interest rate (r) = 14% Period (n) = 180 days First payment amount (P) = $...
Q: 1. if a small bank lends to a customer who wants a mortgage that is too large for the small bank to ...
A: A loan is a financial transaction in which one or more individuals, organisations, or other entities...
Q: A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a ho...
A: Opportunity cost is the loss from choosing one activity over the other. Opportunity cost is the min...
Q: Consider the following statement: "Jenny Limited has an after-tax cost of deb of 6% at the current t...
A: First we need to calculate cost of debt before tax by using this equation Cost of debt before tax ...
Q: Ann got a 30 year Fully Amortizing FRM for $1,000,000 at an annual interest rate of 6% compounded mo...
A: Here, Fully Amortizing FRM = $1,000,000 Annual interest rate = 6% compounded monthly Refinancing cos...
Q: Why is it important to compare standard and actual food and beverage costs?
A: The capacity to assess genuine costs and margins is essential for every organization, particularly t...
Q: 1. What payment 12 years from now is equivalent to a payment of 7,000 9 years from now, if money is ...
A: Hi, there, Thanks for posting the question. As per our Q&A honour code, we must answer the first...
Q: Koenma borrows 500,000 at 15% compounded annually, and he agree to pay the loan in 18 equal annual p...
A: Borrowed amount (PV) = 500,000 Interest rate (i) = 15% Period (t) = 18 Years
Q: Suppose you valued a firm and came up with the value of equity of 9.50. The probability of financial...
A: The value of a share is the current market price of a stock of a company. It is calculated as the pr...
Q: E2. A 41-year-old consulting engineer wants to set up a retirement fund to be used starting at age 6...
A: Amount deposited now (D) = $20000 n = 65 years - 41 years = 24 years r = 6%
Q: Problem 14-04 You are considering purchasing the preferred stock of a firm but are concerned about ...
A: Times preferred dividend earned ratio shows the ability of the company to generate earnings to pay p...
Q: 1. Calculate the receivables turnover ratios and days to collect for Hayes Companies and Softee S 2-...
A: In this given case, the accounts receivables ,net of allowance is not given for Softee sodas for 201...
Q: On January 1, 2020, the company issued $2,500,000 6% bonds with a 10-year maturity. The bonds were i...
A: Solution:- We know, Present Value of a bond = Present value of benefits receivable from bond discoun...
Q: What will be the equivalent uniform annual amount that will be deposited in a bank for 15 years that...
A: Time Period 15 Initial Cost P20,00,000.00 Additional Cost at the end evry 5th year P5,00,000...
Q: A company produces a certain commodity. The labor and material cost for each item produce is P112. O...
A: Given: Fixed cost = P316,000 Selling price = P425 Variable cost = P112 Other variable cost =P67
Q: n the following set of projects from a roadway agency, determine the Minimum Attractive Rate of Retu...
A: A suitable rate of return developed for the appraisal of alternatives is known as the MARR.
Q: You wish to buy a house. The market value of the house is $650,000 and you have saved $120,000 as a ...
A: Interest Rate = 6.5% Time Period = 26 Years Market Value = $650,000 Down Payment = $120,000
Q: Find the present value of an annuity of P30,000 payable annually for 10 years, with the first paymen...
A: An annuity is a contract where, in exchange for a lump sum amount, a fixed amount is paid for a set ...
Q: Ex. You anticipate a tuition liability of $40,000 per year at the end of 3 and 4 years from now. Wha...
A: Here, Tuition Liability in Year 3 and 4 is $40,000 Current Market Interest Rate is 8%
Q: What is the nominal rate if the effective rate is15.32% compounded semi-annually?
A: Effective annual rate (EAR) refers to a real interest rate which an investor is expect from his inve...
Q: Big Rock has several investment portfolios with a local mutual fund company. One of the company’s di...
A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only on...
Q: what are the key characteristics of active fund management and passive fund management, focusing on ...
A: The key characteristics of active fund management is the frequent buying and selling in an attempt t...
Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery w...
A: NPV is the difference between present value of cash inflows and present value of cash outflows. NPV ...
Q: BC Corp. recently obtained a 30-year (360-month), P250,000 mortgage with a 9 percent nominal interes...
A: We need to use loan amortization formula to calculate remaining balance after 5 years. Fist we need ...
Q: hat type of financial challenges is most important for Chief Financial Officers (CFOs) to address im...
A: CFOs of different companies are regularly grappling with some or the other types of financial challe...
Q: We are considering the purchase of a $760,000 computed based inventory management system. It is in c...
A: CCA is the deduction from the value of the asset over the years of its life. It has a set of rates d...
Q: Melinda opened a savings account for her daughter on ? day she depositing $1,000: Each year on her b...
A: Annual deposit (A) = $1000 Number of deposits (n) = 22 r = 9.5%
Q: Lisa has a $37,500 student loan at 3.15% compounded quarterly amortized over 16 years with payments ...
A: Given: Particulars Amount Loan(PV) $37,500 Interest rate 3.15% Years 16
Q: Complete the table:
A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts fo...
Q: Solve the quations: Tony and his team identified some risks during the first month of the Recreation...
A: In financial terms, risk is defined as the possibility that the actual gains from an outcome or inve...
Q: Find how much you should invest now at 6% interest, compounded quarterly in order to have $15,750 in...
A: Present Value: It represents the present worth of the future sum of the amount which is discounted ...
Step by step
Solved in 2 steps with 2 images
- Would you rather have $7,500 today or at the end of 20 years after it has been invested at 15%? Explain your answer. The following are independent situations. For each capital budgeting project, indicate whether management should accept or reject the project and list a brief reason why.With a required rate of return of 17%, the IRR of a standard capital budgeting project is equal to 19%. What does this say about this project’s NPV? Select one: a. The NPV is greater than zero. b. The NPV is equal to zero. c. The NPV is less than zero. d. The NPV is equal to the ratio given by 19% divided by 17%. e. There is not enough information to determine.If the net present value (NPV) of a standard capital budgeting project equals zero: a. The project's IRR is equal to the WACC. b. The project's IRR is less than the WACC. c. The project's IRR is greater than the WACC. d. The project's IRR may be less than, greater than, or equal to the WACC.
- Two firms, Tangerine Inc. and Cyan Inc. analyzed the same capital budgeting project. Tangerine Inc. determined that the project's internal rate of return (IRR) is 9 percent. Cyan Inc. used the net present value (NPV) method to evaluate the project and determined that it is not acceptable. Given this information, which of the following statements is correct? Group of answer choices Cyan Inc.'s required rate of return is greater than 5 percent. I Cyan Inc.'s required rate of return is greater than 9 percent. Tangerine's chief financial officer (CFO) should use the traditional payback period method to evaluate the project. The net present value of the project must be positive for both the firms.A firm has a capital budget of $100 which must be spent on one of twoprojects, each requiring a present outlay of $100. Project A yields a returnof $120 after one year, whereas Project B yields $201.14 after 5 years.Calculate:(i) the NPV of each project using a discount rate of 10%;(ii) the IRR of each project.What are the project rankings on the basis of these two investmentdecision rules? Suppose that you are told that the firm’s reinvestmentrate is 12%, which project should the firm choose?Answer:(i)NPV(A) = 9.09; NPV(B) = 24.89, B>A(ii) IRR(A) = 20%; IRR(B) = 15%, A>BUsing a reinvestment rate of 12% the terminal values are TV(A) = 188.82; TV(B) = 201.14,hence B>A. Alternatively calculate the IRR of (B-A): IRR(B-A) = 13.78% > 12%, henceundertake the “extra project” (B-A) ie. undertake B.This is a typical capital budgeting model. The company must decide which of the 15 potential investments to invest in -- all or nothing for each. The total investmetn cost must not exceed the budget, and the objective is to maximize the total NPV. In addition, there is a side constraint: no more than two investments 1 to 6 can be invested in. Which of the following is true of the optimal solution? (Make sure integer Optimality % is set to 0)
- Suppose that you are considering two projects and only have the financial resources to choose one project. Project A has an internal rate of return (IRR) of 14.5% and Project B, an IRR of 23.5%. The cost of capital is 12%. Explain whether the IRR capital budgeting technique is suitable for you to determine your project selection.Let's assume that you are working on an independent capital budgeting project which is expected to have the following cash flows: Year Cash Flows 0 -$850,000 1 $300,000 2 $400,000 3 $500,000 What is the project’s net present value (NPV) at an 18% required rate of return? (Round to the nearest whole number.) Will you accept or reject this project?Suppose the capital budget was $100,000. What is the NPV of the best project(s)?
- Union Atlantic Corporation, which has a required rate of return equal to 14 percent, is evaluating a capital budgeting project that requires an initial investment of $170,000. The project will generate a $60,750 cash inflow at the year-end of each of the next four years. According to this information, which of the following statements is correct? Group of answer choices The project's is acceptable if its discounted payback period is less than the traditional payback period. The project is acceptable because its net present value is negative. The project is acceptable if its internal rate of return (IRR) is more than 14 percent. The project is acceptable if its discounted payback period is greater than its economic life.Suppose Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $3,000,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $375,000 Year 2 $450,000 Year 3 $425,000 Year 4 $475,000 Celestial Crane Cosmetics’s weighted average cost of capital is 10%, and project Beta has the same risk as the firm’s average project. Based on the cash flows, what is project Beta’s NPV? -$1,972,140 $1,356,550 -$1,643,450 -$4,643,450Knoko Systems is considering a capital budgeting project with a life of five years that requires an outlay of $90,000. It has free cash flows each period as shown in the following distribution: P(FLF) FLF 0.10 $ 0 0.20 12,500 0.40 37,500 0.20 43,750 0.10 50,000 a. Assuming a risk-adjusted required rate of return of 0.20 is appropriate for projects of this level of risk, calculate the risk-adjusted net present value of the project. b. Should the project be accepted?
