(a) Identify each of the following cash flow to indicate whether it is a benefit, a disbenefit, or a cost. (i) (ii) A project manager is constructing a large water dam but incurs a budget shortage. Hence he purchases less expensive turbines with a shorter maintenance cycle. The end result is less project cost, but higher operating cost. The project manager purchased less expensive turbines with a shorter maintenance cycle
Q: Kyle Parker of Concord, New Hampshire, has been shopping for a new car for several weeks. He has…
A: APR or Annual Percentage Rate is defined as the annual interest, which are generated through sum…
Q: 3 10,000 Compute the net present value of each potential investment. Use 7 years for Project 1 and 5…
A: Net present value (NPV) of an alternative/project refers to the difference between the initial…
Q: Clinton Corporation is expected to pay a dividend of $3.50 next year and $5.50 the year after that.…
A: Dividend discount model Under this model, the value or current price of a share is calculated by…
Q: Occam Industrial Machines issued 105,000 zero coupon bonds 5 years ago. The bonds originally had 30…
A:
Q: Mark an American has $6 million that he intends to invest in Kenya. The macroeciomic variables of…
A: Covered interest arbitrage results the arbitrage profit through the favorable interest rate…
Q: if $875 000 is saved for retirement, what rate of interest, compounded semi-annually, will provide…
A: We will use the concept of time value of money here. As per the concept of time value of money the…
Q: What is the effective annual rate of interest if $1200.00 grows to $1500.00 in two years compounded…
A: Effective Annual Rate: It is the real rate of return paid on a loan or earned on an investment,…
Q: A price level adjusted mortgage (PLAM) is made with the following terms: Amount = $96,500…
A: Price Level Adjusted Mortgage: It is a graduated-payment home loan and inflation is adjusted on…
Q: m currently pays a dividend of 4 EURO per share. That dividend is expected to grow a a 5% rate…
A: Value of stock can be found based on the constant dividend growth model based on required rate of…
Q: 20. Suppose a set of apartments have a replacement cost of $1,472,000, and the contents are valued…
A: Data given: Value of building= $ 1472,000 Value of contents = $ 2,285,000 Territorial rating =5…
Q: A company has a zero coupon bond issue with a face value of $2.2 million that matures in one year.…
A: Present value of asset = $3,400,000 Maturity value of debt = $2,200,000 The debt matures after a…
Q: Why have ETFs grown to become one of the most popular investment products? What are some of the…
A: Exchange traded funds are all such mutual funds which will be traded over the exchanges and they are…
Q: discuss four ethical issues found in the finance industry and responsible investing as a way to…
A: The insider trading, stakeholder interest against stockholder interest, investment management, and…
Q: You lend a friend $10,000. for which your friend will repay you $27,027 at the end of 5 years.…
A: FV or Future value = PV or Present value * (1+interest rate)^no. of years Interest rate = ((FV or…
Q: Triangular Chemicals has total assets of $95 million, a return on equity of 44%, a net profit margin…
A: Net profit margin is the net income generated by the sales revenue of the firm for a specified…
Q: Problem 1. Ferry Motors' common stock just paid its annual dividend of $1.80 per share. The required…
A: We will use the dividend discount model here. As per the dividend discount model the value of a…
Q: What is the present value of $700. to be received in 14 years from now discounted back to the…
A: The present value of future cash flows will be calculated after discounting the future cash flows at…
Q: Trump corporation ix expected to pay a dividend of $3.00 next year (D₁) and has a beta of 1.2.…
A: The required rate of return is the rate of return that investors in the shares of a company require…
Q: carl's Earthmoving is considering the purchase of a piece of heavy equipment. What is the cash flow…
A: Data given: First Cost = $120,000; O&M =30,000 per year; Overhaul cost =$35,000 in year 3;…
Q: Determine the buyer's return for the buyer of a 20-year, 8.5% bond of 2,000,000 face value if on the…
A: Interest on bond for 20 years = Face value * Interest rate * time
Q: Sally purchased a home in Georgia for $167,500. She took out a mortgage for 80% of the purchase…
A: Prepaid Expenses are those expenses that are paid in advance and which is recorded in the balance…
Q: Engineering Economics Prepare a sinking fund schedule if Mrs. Lebwrong Blames would like to…
A:
Q: An investment of $2,009,000 today yields positive cash flows of $400,000 each year for years 1…
A: Given, Initial investment is $2,009,000 Cashflows is $400,000 MARR is 13%
Q: An FI has estimated the following annual costs for its demand deposits: management cost per account…
A: Regulators impose reserve requirements on demand deposits of banks and FIs. The reserve requirements…
Q: If $27895 is borrowed for 5 months and P688 is paid, then the annual simple interest rate is…
A: Simple interest is one of the form of interest in which interest is charged on original investment…
Q: why should investors consider constructing global portfolios?how do currency fluctuation concern s…
A: Global portfolios mean- Purchase share of foreign company or companies. Purchase bonds issued by a…
Q: It is desired to determine the present economic value of an old machine by considering of how it…
A: Net Present Value is a technique in Capital budgeting which is used for evaluation of project on the…
Q: Topic: Option Pricing When computing, please do not round off. Only final answers must be rounded…
A: Put option contracts are one of the type of future contract under which agreement is made for…
Q: Find the nominal value and the time to redemption of 10 (the same) zero-coupon bonds, if they can be…
A: Bond Prices, Interest rates and time to maturity: Bond prices are sensitive to changes in interest…
Q: A 3,000,000 peso loan is to be amortized at 4.55% quarterly for 2 years. Solve for the value inside…
A: Here, Loan Amount is 3,000,000 pesos Interest Rate is 4.55% Time Period is 2 years Compounding…
Q: Determine the ff. 1. Call Option - Total Value 2. Call Option - Intrinsic Value 3. Call Option -…
A: The call option gives the buyer of the option the choice to purchase the underlying asset at the…
Q: anaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a…
A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…
Q: Steve purchases preferred stock in Berklee Corporation, with each share paying a $2.50 dividend.…
A: The preferred stocks are paying with fixed annual dividend to the preferred stockholders. The market…
Q: A 3,000,000 peso loan is to be amortized at 4.55% quarterly for 2 years. Solve for the value inside…
A: Quarterly payment for loan will be, Where, P = Loan amount =3000000 r = Quarterly interest rate =…
Q: Which of the following will (holding everything else constant) cause the price earnings (P/E) ratio…
A: The price to earning ratio is the ratio of current market price with respect to the earning per…
Q: For a 12-year service at a farm, two machines are being taken into consideration. The favorable rate…
A: Annual cost is the estimated amount which the firm has to spend each year based on prevailing…
Q: xplain why finance is both a science and an ar
A: Finance is very vast and complex field and there are many complexities involved in that and it is…
Q: Mima Sassa wants to spend PHP 600,000 on a new equipment. The machine's estimated service life is…
A: Here, Initial Investment is Php600,000 Annual Cash Flows is Php150,000 Time Period is 6 years
Q: b) Project Swan requires an initial investment of $550,000 and is expected to generate the following…
A: Payback period is one of the method used for evaluation of project under capital budgeting. This…
Q: B2B Co. is considering the purchase of equipment that would allow the company to add a new product…
A: As per the given information: Cost of equipment purchased - $376,000 Life of equipment - 8-year life…
Q: Do not do any interim rounding, state your answer in years to 2 decimal places, do not label your…
A: Here, Present value (PV) = 1,010,400 Interest rate = 8.15% Future value (FV) = 2 × 1,010,400 FV =…
Q: Determine the monthly mortgage payment for the 30-year loan
A: Mortgage Payments: These are payments made by the borrower to amortize the amount of the mortgage.…
Q: Hansel has been driving her Jaguar X-Type luxury car for many years and has now decided to sell her…
A: CASE I : Hansel decided to sell her Jaguar. Hansel puts an advertisement in the newspaper saying…
Q: Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the…
A: As per the given information: Amount spend for a marketing study - $300,000 Land purchased 5 years…
Q: In 1895, the first U.S. Open Golf Championship was held. The winner's prize money was $160. In 2019,…
A: Value of Prize money in 1895 is $160 Value of Prize money in 2019 is $1,400,000 To Find: Annual…
Q: 1. The option is currently A. In-the-money B. At-the-money C. Out-the-money 2. Determine the…
A: An option considered in-the-money indicates that there is an opportunity to make a profit because of…
Q: Problem 12-16 SML and WACC [LO 4] An all-equity firm is considering the following projects: Project…
A: As per the given information: Project Beta IRR W .54 10.1% X .91 10.6 Y 1.09 14.1 Z 1.83…
Q: FV(Monthly.) = $100(1.01)60
A: We need to use future value formula to solve this problem FV =PV(1+i)n where FV=future value PV…
Q: 2) An account earns (12) = 2% for the first two years, i(12) = 3% for the net two years, and (12) =…
A: The accumulated value of an annuity is the future value of all the payments that have been made. It…
Q: JPY Inc borrowed $705,000 for 30 years at a rate of 4.68% APR compounded monthly, with first payment…
A: Given: Particulars Amount Borrowed(PV) 705000 Years 30 APR 4.68%
9
Step by step
Solved in 2 steps
- 4. Modified internal rate of return (MIRR) The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project’s IRR. Consider the following situation: Green Caterpillar Garden Supplies Inc. is analyzing a project that requires an initial investment of $500,000. The project’s expected cash flows are: Year Cash Flow Year 1 $300,000 Year 2 –100,000 Year 3 450,000 Year 4 450,000 Green Caterpillar Garden Supplies Inc.’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): 22.81% 18.25% 21.67% 20.53%Which of the statements below is TRUE regarding capital budgeting? O A. Capital budgeting deals with how much to apportion spending on current assets. O B. Projects with NPVS greater than the IRR should be accepted. OC. We can find a project's NPV by simply taking the product of all of the project's undiscounted cash flows. O D. Ceteris paribus, a lower cost of capital would increase a project's NPV.4. Modified internal rate of return (MIRR) The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. However, in reality, the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project's IRR. Consider the following situation: United Fried Cheese Co. is analyzing a project that requires an initial investment of $2,750,000. The project's expected cash flows are: Year Year 1 Cash Flow $375,000 Year 2 -$125,000 Year 3 Year 4 $400,000 $475,000 United Fried Cheese Co.'s WACC is 10%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR). ○ -16.10% -19.32% -15.29% ○ -14.49% If United Fried Cheese Co.'s managers select projects based on the MIRR criterion, they should this independent project.
- In calculating Net Present Value (NPV), which one of the following is not an example of a relevant cashflow: A Incremental Operating Costs B Initial investment (including installation costs) C Depreciation D Increased working capital (current assets (cash, receivable and inventories less current liabilities) Question 2 Which of the following best describes a ‘basic standard’ with respect to costs in a budgeting exercise? A A standard which assumes an efficient level of operation, but which includes allowances for factors such as normal loss, waste and machine downtime B A standard which is kept unchanged over a period of time C A standard which is based on current price levels D A standard set at an ideal level, which makes no allowance for normal losses, waste and machine downtime Question 3 Which of the following statements about budgets and standards are true? A Standards can only be achieved under ideal conditions B Budgets can be used in situation where output cannot…QUANTITATIVE. Fill in the following statements based on the below project financial analysis. a. The Net Present Value is b. The Return on Investment is c. The project will break even (make back its costs) in Year d. This project Created by: Praju Manageski Note: Change the inputs, such as discount rate, number of years, costs, and benefits. Be sure to Discount rate Costs Discount factor Discounted costs Benefits Discount factor Discounted benefits profitable because the ROI and NPV are both Financial Analysis for Project GGU Assume the project is completed in Year 0 Discounted benefits -costs Cumulative benefits - costs ROI 5% 10,000 1.00 10,000 0 1.00 0 (10,000) (10,000) 16% 0 0.95 2,000 0.95 1,905 Year 0 0.91 5000 0.91 4,535 1,905 4,535 (8,095) (3,560) 0 0.86 . 6000 0.86 5,183 5,183 1,623 10,000 11,623 1,623 NPVModified internal rate of return (MIRR) The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project’s IRR. Consider the following situation: Green Caterpillar Garden Supplies Inc. is analyzing a project that requires an initial investment of $2,225,000. The project’s expected cash flows are: Year Cash Flow Year 1 $350,000 Year 2 –125,000 Year 3 450,000 Year 4 450,000 Green Caterpillar Garden Supplies Inc.’s WACC is 7%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR): -12.63% 26.46% 30.64% 29.24% If Green Caterpillar Garden Supplies Inc.’s managers select projects based on the MIRR criterion,…
- 4. Modified internal rate of return (MIRR) The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project's IRR. Consider the following situation: Celestial Crane Cosmetics is analyzing a project that requires an initial investment of $3,000,000. The project's expected cash flows are: Year Year 1 Year 2 Year 3 Year 4 Celestial Crane Cosmetics's WACC is 7%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): O-20.94% O 17.35% Cash Flow $275,000 -125,000 400,000 450,000 O 19.00% O 15.69%You have determined the profitability of a planned project by finding the present value of all the cash flows from that project. Which of the following would cause the project to look more appealing in terms of the present value of those cash flows? A. The discount rate increases. B. The cash flows are extended over a longer period of time, but the total amount of the cash flows remains the same. C. The discount rate decreases. D. Answers B and C above. E. Answers A and B above.If a project has a positive net present value, then which of the following statements are correct? I. The present value of all cash inflows must equal the costs of the project. The IRR is equal to the required rate of return. II. A increase in the project's initial cost will cause the project to have a higher positive NPV. III. Any delay in receiving the projected cash inflows will cause the project to have a higher positive NPV. IV. IRR must equal zero. Only II Only III All None of them
- For a typical project evaluation with initial investment at time=0 and positive cash flows afterwards, each statement in the following shows possible answers in parenthesis. Choose the answer that shows correct answers for all statements. Statement 1: When NPV = 0, investors earn (negative/zero/positive) return. Statement 2: Accept the project when valuation is (higher/the same/lower) than the cost. Statement 3: When IRR> cost of capital, NPV is (negative/zero/positive). Statement 4: Cost of capital is determined by the (company/investors) considering the (business risk/systematic) risk) a. negative, higher, positive, investors and systematic b. positive, lower, positive, investors and business c. positive, higher, zero, company and systematic d. positive, higher, positive, investors and systematicWhich of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. O A project's regular IRR is found by compounding the initial cost at the WACC to find the terminal value (TV), then discounting the TV at the WACC. A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost. O If a project's IRR is smaller than the WACC, then its NPV will be positive. O A project's regular IRR is found by compounding the cash inflows at the WACC to find the present value (PV), then discounting the TV to find the IRR.4. Modified internal rate of return (MIRR) The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. However, in reality the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, the modified IRR approach makes a more reasonable assumption other than the project's IRR. Consider the following situation: Grey Fox Aviation Company 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 Year 2 Year 3 Year 4 Grey Fox Aviation Company's WACC is 8%, and the project has the same risk as the firm's average project. Calculate this project's modified internal rate of return (MIRR): 16.25% 13.69% $325,000 -150,000 450,000 475,000 14.54% -20.05% If Grey Fox Aviation Company's managers select projects based on the MIRR criterion, they should Which of the following statements about the relationship between the IRR and the MIRR is…