Huang Industries is considering a proposed project whose estimated NPV is $12 million. This es However, the CFO realizes that conditions could be better or worse, so she performed a scenari Economic ScenarioProbability of Outcome NPV Recession 0.05 ($86 million) Below average 0.20 (14 million) Average 0.50 12 million Above average 0.20 24 million Boom 0.05 40 million Calculate the project's expected NPV, standard deviation, and coefficient of variation. Enter you deviation in millions. For example, an answer of $13,000,000 should be entered as 13. Do not decimal places. E(NPV): million ONPV: million

Huang Industries is considering a proposed project whose estimated NPV is $12 million. This es However, the CFO realizes that conditions could be better or worse, so she performed a scenari Economic ScenarioProbability of Outcome NPV Recession 0.05 ($86 million) Below average 0.20 (14 million) Average 0.50 12 million Above average 0.20 24 million Boom 0.05 40 million Calculate the project's expected NPV, standard deviation, and coefficient of variation. Enter you deviation in millions. For example, an answer of $13,000,000 should be entered as 13. Do not decimal places. E(NPV): million ONPV: million

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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Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be "average." However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic Scenario Probability of Outcome NPV Recession 0.05 ($34 million) Below average 0.20 (16 million) Average 0.50 12 million Above average 0.20 16 million Boom 0.05 28 million Calculate the project's expected NPV, standard deviation, and coefficient of variation. Enter your answers for the project's expected NPV and standard deviation in millions. For example, an answer of $13,000,000 should be entered as 13. Do not round intermediate calculations. Round your answers to two decimal places. E(NPV): million σNPV: million CV:
Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be "average." However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic Scenario Probability of Outcome NPV Recession 0.05 ($64 million) Below average 0.20 (10 million) Average 0.50 12 million Above average 0.20 16 million Boom 0.05 30 million Calculate the project's expected NPV, standa
Celestial Crane Cosmetics is analyzing a project that requires an initial investment of $3,225,000. The project's expected cash flows are: Year Cash Flow Year 1 $375,000 Year 2 -125,000 Year 3 500,000 Year 4 400,000 If the company's WACC is 8% and the project has the same risk as the firm's average project, what is the project's modified internal rate of return (MIRR)? Should you accept or reject this project?
Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be "average." However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic Scenario Probability of Outcome Recession Below average Average Above average E(NPV): ONPV: CV: X million 0.05 million 0.20 Boom 40 million Calculate the project's expected NPV, standard deviation, and coefficient of variation. Enter your answers for the project's expected NPV and standard deviation in millions. For example, an answer of $13,000,000 should be entered as 13. Do not round intermediate calculations. Round your answers to two decimal places. 0.50 0.20 NPV 0.05 ($38 million) (16 million) 12 million 20 million
The Webex Corporation is trying to choose between the following two mutually exclusive designprojects: Year Net Cash Flow Project - I($) Net Cash Flow Project - II($) 0 (53,000) (16,000) 1 27000 9100 2 27000 9100 3 27000 9100 (a) If the required return is 10% and the company applies the Profitability Index decision rule,which project should the firm accept?(b) If the company applies the Net Present Value decision rule, which project should it take?(c) Explain why your answers in (a) and (b) are different(d) Calculate the Internal Rate of Return of both projects.
Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be "average." However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic Scenario Probability of Outcome Recession ($40 million) (24 million) 12 million 18 million Boom 0.05 34 million Calculate the project's expected NPV, standard deviation, and coefficient of variation. Enter your answers for the project's expected NPV and standard deviation in millions. For example, an answer of $13,000,000 should be entered as 13. Do not round intermediate calculations. Round your answers to two decimal places. Below average Average Above average E(NPV): ONPV: CV: million million 0.05 0.20 0.50 NPV 0.20
Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be "average." However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic Scenario Probability of Outcome NPV Recession 0.05 ($42 million) Below average 0.20 (24 million) Average 0.50 12 million Above average 0.20 22 million Boom 0.05 40 million Calculate the project's expected NPV, standard deviation, and coefficient of variation. Enter your answers for the project's expected NPV and standard deviation in millions. For example, an answer of $13,000,000 should be entered as 13. Do not round intermediate calculations. Round your answers to two decimal places. E(NPV): million ONPV: million CV:
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively. Time: Cash flow: -$ 231,000 $ 65,400 Use the Pl decision rule to evaluate this project. Note: Do not round intermediate calculations and round your final answer to 2 decimal places. PI 5 $ 83,600 $ 140,600 $ 121,600 $ 80,800 Should it be accepted or rejected? (Click to select)
Connor Corporation is considering two projects (see below) For your analysis assume these projects are mutually exclusive with a required rate of return of 10% project 1 Initial investment =$465,000 cash inflow Year 1= $510,000 project 2 Initial investment=$700,000 cash inflow Year 1= $850,000 Compute the following for each project NPV(net present value) PI(profitability index) IRR(internal rate of return show work
6. Within-firm risk and beta risk Understanding risks that affect projects and the impact of risk consideration Yatta Net International has manufacturing, distribution, retail, and consulting divisions. Projects undertaken by the manufacturing and distribution divisions tend to be low-risk projects, because these divisions are well established and have predictable demand. The company started its retail and consulting divisions within the last year, and it is unknown if these divisions will be profitable. The company knew that opening these new divisions would be risky, but its management believes the divisions have the potential to be extremely profitable under favorable market conditions. The company is currently using its WACC to evaluate new projects for all divisions. If Yatta Net International does not risk-adjust its discount rate for specific projects properly, which of the following is likely to occur over time? Check all that apply. The firm will accept too many relatively…
Celestial Crane Cosmetics is analyzing a project that requires an initial investment of $2,500,000. The project's expected cash flows are: Year Cash Flow Year 1 $300,000 Year 2 -175,000 Year 3 425,000 Year 4 475,000 Celestial Crane Cosmetics's WACC is 9%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): 23.18% 24.29% -15.86% O 19.87% If Celestial Crane Cosmetics's managers select projects based on the MIRR criterion, they should this independent project.
Find the modified internal rate of return (MIRR) for a proposed project costing $12,513. Assume that the appropriate cost of capital for projects of this risk level, at this company is 10.96%, and the estimated cash flows for the life of the project are found in the table below. (If you calculate an MIRR of 20.22% , please enter 20.22- do not include the % symbol, and use at least two decimal places). Year 1 $7,261 Year 2 $4,832 Year 3 $9,441.2 Year 4 $13,000 Year 5 $12,638

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