Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 8, Problem 22P
Summary Introduction
To determine: The
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Compute the PI statistic for Project Z if the appropriate cost of capital is 6 percent. Project Z Cash flow: –$3,300 $730 $860 $1,030 $680 $480
Compute the NPV statistic for Project U given the following cash flows if the appropriate cost of capital is 9 percent.
Project U
Time
0
1
2
3
4
5
Cash Flow
–$
1,000
$
350
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Compute the NPV statistic for Project X given the following cash flows if the appropriate cost of capital is 12 percent.
Project X
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1
2
3
4
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–$
15,000
$
6,000
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10,000
$
12,000
–$
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Chapter 8 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 8.1 - How do we forecast unlevered net income?Ch. 8.1 - Prob. 2CCCh. 8.1 - Prob. 3CCCh. 8.2 - Prob. 1CCCh. 8.2 - What is the depreciation tax shield?Ch. 8.3 - Prob. 1CCCh. 8.3 - Prob. 2CCCh. 8.4 - Prob. 1CCCh. 8.4 - What is the continuation or terminal value of a...Ch. 8.5 - Prob. 1CC
Ch. 8.5 - How does scenario analysis differ from sensitivity...Ch. 8 - Pisa Pizza, a seller of frozen pizza is...Ch. 8 - Kokomochi is considering the launch of an...Ch. 8 - Home Builder Supply, a retailer in the home...Ch. 8 - Hyperion, Inc. currently sells its latest...Ch. 8 - Table 8.1 Spreadsheet HomeNets Incremental...Ch. 8 - Prob. 6PCh. 8 - Castle View Games would like to invest in a...Ch. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - Prob. 11PCh. 8 - A bicycle manufacturer currently produces 300,000...Ch. 8 - One year ago, your company purchased a machine...Ch. 8 - Prob. 15PCh. 8 - Markov Manufacturing recently spent 15 million to...Ch. 8 - Prob. 17PCh. 8 - Arnold Inc. is considering a proposal to...Ch. 8 - Bay Properties is considering starting a...Ch. 8 - Prob. 21PCh. 8 - Prob. 22P
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- Net present value method, present value index, and analysis for a service company First United Bank Inc. is evaluating three capital investment projects by using the net present value method. Relevant data related to the projects are summarized as follows: Instructions 1. Assuming that the desired rate of return is 15%, prepare a net present value analysis for each project. Use the present value table appearing in Exhibit 2 of this chapter. 2. Determine a present value index for each project. (Round to two decimal places.) 3. Which project offers the largest amount of present value per dollar of investment? Explain.arrow_forwardProject S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?arrow_forwardAverage rate of return The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Determine the expected average rate of return for each project.arrow_forward
- Wallace Company is considering two projects. Their required rate of return is 10%. Which of the two projects, A or B, is better in terms of internal rate of return?arrow_forwardDetermine the IRR of the project and the NPV of the project at a cost of capital of 12% using the Excel functions. For the calculation of NPV, includecash flows 1 through 5 in the NPV function and then subtract the initial cost(i.e., = NPV1rate, CF1 CF52 + CF02. For IRR, include cash flows 0 through 5 inthe cash flow rangearrow_forwardFind the net present value (NPV) and profitability index (PI) of a project that costs $1,500 and returns $800 in year one and $850 in year two. Assume the project’s cost of capital is 8 percent.arrow_forward
- Consider the cash flows for the following investment projects: (a) For Project A. find the value of X that makes the equivalent annual receiptsequal the equivalent annual disbursement at i = 13%.(b) Would you accept Project Bat i = 15% based on the AE criterion?arrow_forwardCompute the NPV for Project X and accept or reject the project with the cash flows shown below if the appropriate cost of capital is 11 percent. Time: 0 1 2 3 4 5 Cash flow: -165 -165 0 280 255 230arrow_forwardAn investment project has an initial cost of $260 and cash flows $75, $105, $100, and $50 for years 1 to 4 respectively. The cost of capital is 12%. What is the discounted payback period?arrow_forward
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