Consider the project balances in following Table for a typical investment project with a service life of four years.ProjectBalanceCashPeriodFlow$ (5,200) $ (5,200)$ (3,780)$ (547)$ 3,771$ 3,600 $ 7,93713.Determine the interest rate used in computing the project balance.O 1496O 10%6896O None of these

Balance in Year 4 = 7937-3771 = 4166 Amount changed in year 4 to 3600

Consider the project balances in following Table for a typical investment project with a service life of four years. Cash Project Period Flow Balance $ (5,200) $ (5,200) $ (3,780) $ (547) $ 3,771 $ 3,600 $ 7,937 2. 3. Determine the interest rate used in computing the project balance. O 1496 10% 896 None of these

Consider the project balances in following Table for a typical investment project with a service life of four years. Cash Project Period Flow Balance $ (5,200) $ (5,200) $ (3,780) $ (547) $ 3,771 $ 3,600 $ 7,937 2. 3. Determine the interest rate used in computing the project balance. O 1496 10% 896 None of these

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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You are given the following data for a project that is to be evaluated using the APV method. Year EBIT CAPEX 0 O $201.765 O $193,822 O $185,617 O $222,872 O $213,918 1 $127.000 $60,000 2 Depreciation Increase in NWC Year-end net debt $80,000 Cost of net debt = 8% Unlevered cost of capital = 11.8% Corporate tax rate = 30% Calculate the total value of the project at t = 0. using the APV method. $72,000 $50,000 $100,000 $133,000 $40,000 $80,000 $60,000 $140,000 3 $138.500 $10,000 $84,000 $30,000 $140,000
Company A has provided figures for two investment projects, only one of which may be chosen. These are the calculations based on the figures: Payback Period The Accounting Rate of Return / Return on Capital Employed Net Present Value Project A 2 years 4 months 27.08% £63,705 Project B 2 years 7 months 39.47% £74.971 Analyse and provide recommendations as to what project needs to be chosen based on the calculations above.
Crane Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $164,000 $180,500 $204,000 Annual net income: Year 1 14,420 18,540 27,810 2 14,420 17,510 23,690 14,420 16,480 21,630 4 14,420 12,360 13,390 14,420 9,270 12,360 Total $72,100 $74,160 $98,880 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view the factor table. Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono years Project Edge years Project Clayton years
U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Capital investment Annual net income: Total Year 1 (a) 2 Project Bono 3 4 Project Edge 5 Project Bono $160,000 14,000 Project Clayton 14,000 14,000 Click here to view the factor table. 14,000 14,000 $70,000 Project Edge Project Clayton $175,000 $200,000 18,000 17,000 16,000 12,000 9,000 $72,000 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) years 27,000 years 23,000 Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) years 21,000 13,000 12,000 $96,000
Compute for the benefit ratio of the following projects. Project cost Gross income Operating cost Life of project Interest rate O a. 1.20 O b. 1.70 O c. 1.07 O d. 1.02 5,000,000 2,000,000 1,000,000 20 years 10%
When evaluating the following project, if the required return is 10 percent, what is its NPV? Year Project A ($1,200) 1 125 2. 250 3. 400 4 1000 O $100.57 $98.32 $103.79 O $99.22
What is the “cross-over” rate of the following projects? Year Project A Project B 0 -1,400 -800 1 950 600 2 950 600
REQUIRED Study the information given below and calculate the Accounting Rate of Return on initial investment (expressed to two decimal places) of each project. INFORMATION The following data relate to two investment projects, only one of which may be selected: Project A Project B R R Initial capital expenditure 180 000 180 000 Net cash inflow per year: Year 1 90 000 36 000 Year 2 72 000 36 000 Year 3 54 000 86 000 Year 4 36 000 94 000 Expected scrap value (not included in the figures above) 36 000 0 Note: Depreciation is calculated using the straight-line The cost of capital is 15%. REQUIRED Use the capital asset pricing model to calculate the cost of the ordinary shares from the information provided below. INFORMATION The financial managers of Computex have…
5. The data below are estimated for a project study. į = 10% Plan A Initial Investment Annual Operating Cost Life Salvage Value Annual Revenue Plan B Initial Investment Annual Revenue Annual Disbursement Life Salvage Value P 35,000 P 6,450 4 years none 19,000 P 50,000 P 25,000 P 13830 8 years none Which plan would you recommend? Use Present Worth Method and 8 years of study period. Profit for Plan A = 9047.85 Profit for Plan B =9, 591.13
The following data are accumulated by Watershed Inc. in evaluating two competing capital investment proposals: Project A Project Z Amount of investment $64,000 $84,000 Useful life 4 years 9 years Estimated residual value 0 0 Estimated total income over the useful life $8,960 $43,470 Determine the expected average rate of return for each project. Round your answers to one decimal place. Project A % Project Z %
1. Determine the B/C ratio for the following project. First Cost P100, 000 Project life, years 5 Salvage value P10, 000 Annual benefits P60, 000 Annual O and M P22, 000 Interest rate, % 15 Ans: B/C = 1.16
Complete the projected income statement for the first five years of the project. Fill in the following details , Determine the PAT of the project as a banker will you finance them on the basis of PAT Year 1 2 3 4 Capacity utilization (%) 55 65 75 85 85 Sales Operating expenses Material Salaries Marketing & other 119 137 155 173 173 expenses PBDIT Depreciation 236.92 180.10 137.38 105.20 80.98 Prelm. Exp. Wloff 10 10 10 10 10 PBIT Int. on TL Int. on WC loan 4.50 4.50 4.50 4.50 4.50

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