You are considering the following project: It pays you $2,500 at the end of the first year, costs $8,500 by the end of the second year and brings $6,800 a year after. What is the project's internal rate of return(s), exact external rate of return and the approximate external rate of return it current MARR is 14%?
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You are considering the following project: It pays you $2,500 at the end of the first year, costs $8,500 by the end of the second year and brings $6,800 a year after. What is the project's
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- A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash inflows (before depreciation and taxes) are expected to be $5,000 per year for five years. The firm uses the straight-line depreciation method with a zero salvage value and has a (marginal) income tax rate of 40 percent. The firms cost of capital is 12 percent. Compute the IRR and the NPV. Should the firm accept or reject the project?Consider the investment project with the net cash flows as shown in the following table. What would be the value of X if the project's IRR is 23%? (a) $4,500(b)$4,750(c) $6,890(d)$6,500A rural community/company is considering an investment in a cottage industry for which the net cash flows have been estimated as follows: i) What is the NPV if the discount rate is 10%? ii) Using discount rates of 10% and 14% calculate the IRR? iii) Is this project acceptable?
- You are considering developing an 18-hole championship golf course that requires an investment of $18,000,000. This investment cost includes the course development, club house, and golf carts. Once constructed, you expect the maintenance cost for the golf course to be $640,000 in the first year, $695,000 in the second year and continue to increase by $55,000 in subsequent years. The net revenue generated from selling food and beverage will be about 17% of greens fees paid by the players. The cart fee per player is $20, and 40,000 rounds of golf are expected per year. You will own and operate the course complex for 9 years and expect to sell it for $24,000,000. What is the greens fee per round that will provide a return on investment of 17%? Assume that the greens fee will be increased at an annual rate of 6%. The greens fee that will provide a return on investment of 17% is _____ per round. (Round to the nearest cent.)Consider two investments A and B with the sequences of cash flows given in the table below. A) If A and B are mutually exclusive? projects, which project would you select based on the rate of return on incremental investment at MARRequals=6?%? The rate of return on the incremental investment is ?If the internal rate of return on a project exceeds its cost of obtaining the funds, it’s a good investment. Question 9 options: True False
- You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated annual revenue at the end of each year in the eight year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = ε =12% per year, answer the following questions. Using AW, determine whether this proposal is acceptable. What is the ERR of this proposal? Is it acceptable? What is the IRR of this proposal? Is it acceptable? What is the simple and discounted payback period for this proposal?You are considering developing an 18-hole championship golf course thatrequires an investment of $20,000,000. This investment cost includes the course development, club house, and golf carts. Once constructed, you expect the maintenance cost for the golf course to be $650,000 in the first year, $700,000 in the second year and continue to increase by $50,000 in subsequent years. The net revenue generated from selling food and beverage will be about 15% of greens fees paid by the players. The cart fee per player is $15, and 40,000 rounds of golf are expected per year. You will own and operate the course complex for 10 years and expect to sell it for $25,000,000. What is the greens fee per round that will provide a return on investment of 15%'? Assume that the green fee will be increased at an annual rate of 5%.Consider the following two mutually exclusive service projects with projectlives of three years and two years, respectively. (The mutually exclusive service projects will have identical revenues for each year of service.) The interest rate is known to be 12%. Net Cash Flow End of Year Project A Project B 0 -$1,000 -$800 1 -400 -200 2 -400 -200+0 3 -400+200 If the required service period is six years and both projects can be repeated with the given costs and better service projects are unavailable in the future, which project is better and why? Choose from the following options:(a) Select Project B because it will save you $344 in present worth over the required service period.(b) Select Project A because it will cost $1,818…
- The annual benefits of $4,000 every year for three years may be obtained for an investment on a production equipment costing $20,000 with a salvage value of $5,000. If the interest rate is 6%, choose the right equation to determine the NPW. Group of answer choices NPW = -20,000 + 4,000(P/A, 6%, 3) + 5,000(P/F, 6%, 3) NPW = -20,000(P/F, 6%, 3) + 4,000(P/A, 6%, 3) + 5,000(P/F, 6%, 3) NPW = 20,000(F/P, 6%, 3) + 4,000(F/A, 6%, 3) + 5,000 NPW = 20,000(P/F, 6%, 3) + 4,000(F/A, 6%, 3) + 5,000Smith and Co. has to choose between two mutually exclusive projects. If it chooses project A, Smith and Co. will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 10%? Cash Flow Project A Project B Year 0: –$17,500 Year 0: –$40,000 Year 1: 10,000 Year 1: 8,000 Year 2: 16,000 Year 2: 16,000 Year 3: 15,000 Year 3: 15,000 Year 4: 12,000 Year 5: 11,000 Year 6: 10,000 $15,731 $11,012 $12,585 $9,439 $14,158 Smith and Co. is considering a three-year project that has a weighted average cost of capital…You have a project with the net cash flow summarized below. The project is not suitable for direct reinvestment, so incoming revenue will be placed into an external account that yields 2.5%. (The "External Reinvestment Rate" is 2.5%). What is the ERR for this project? (Provide your answers in digits only with 2 decimal places. No comas or pesos or percent.)