Question # 2Global Systėms Inc. Plans to open a new product line next year. Theafter tax cash inflows of the two plans is listed below. .The firm’scost of capital is 15 percent. The initial investment for each plan isRs5,00,000.PLANYEAR 1 YEAR2YEAR3YEAR4YEARSABRs300Rs225.Rs325Rs325Rs150Rs100XYRs150Rs200-"Rs300Rs100a) Construct the NPV profiles for PLAN AB and PLAN XY. WhichPLAN has a higher IRR?.b) According to the NPV criterion which PL AN should GlobalSystems choose?c) Calculate the cost of capital at which the NPV and the IRRrankings conflict?.d) Which plan should the company choose? Why?*Note: All value of year 1 to 5 are in "000"

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Global Systėms Inc. Plans to open a new product line next year. The after tax cash inflows of the two plans is listed below. The firm's cost of capital is 15 percent. The initial investment for each plan is Rs5,00,00o. PLAN YEAR 1 YEAR2 YEAR3_YEAR4 YÉARS AB Rs300 Rs325 Rs150 "Rs30O Rs225 - Rs100 XY Rs150 Rs200 Rs325 Rs100 a) Construct the NPV profiles for PLAN AB and PLAN XY. Which PLAN has a higher IRR?. b) According to the NPV criterion which PLAN should Global Systems choose? c) Calculate the cost of capitał at which the NPV and the IRR rankings conflict?. d) Which plan should the company choose? Why?

Global Systėms Inc. Plans to open a new product line next year. The after tax cash inflows of the two plans is listed below. The firm's cost of capital is 15 percent. The initial investment for each plan is Rs5,00,00o. PLAN YEAR 1 YEAR2 YEAR3_YEAR4 YÉARS AB Rs300 Rs325 Rs150 "Rs30O Rs225 - Rs100 XY Rs150 Rs200 Rs325 Rs100 a) Construct the NPV profiles for PLAN AB and PLAN XY. Which PLAN has a higher IRR?. b) According to the NPV criterion which PLAN should Global Systems choose? c) Calculate the cost of capitał at which the NPV and the IRR rankings conflict?. d) Which plan should the company choose? Why?

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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Suppose that you have generated the estimates listed below from a pro forma analysis for a company that had requested a three year loan. The loan is a $1.5 million term loan with the equal annual payments of principals. The P&I payments are due at the end of each year with the annual interest rate = Prime rate + 1.5%. Yr.1 Yr. 2 Yr. 3 Capital expenditure 250,000 125,000 75,000 Cash dividends 140,000 140,000 140,000 Cash flow from operations before interest expense 750,000 780,000 800,000 Assuming the Prime rate = 7.5% each year. What will be the interest payment at year 3? a). 25,000 b). 50,000 c). 45,000 d). 53,000 e). 10,000
Q1/ Ipswich Corporation is considering an investment opportunity with the expected net cash inflows of $300,000 for four years. The residual value of the investment, at the end of four years, would be $70,000. The company uses a discount rate of 14%, and the initial investment is $290,000. Calculate the NPV of the investment. Present value of an ordinary annuity of $1: 12% 13% 14% 15% 1. 0.893 0.885 0.877 0.87 2. 1.69 1.668 1.647 1.626 2.402 2.361 2.322 2.283 4 3.037 2.974 2.914 2.855 3.605 3.517 3.433 3.352 Present value of $1: 12% 13% 14% 15% 0.893 0.885 0.877 0.87 2. 0.797 0.783 0.769 0.756 0.712 0.693 0.675 0.658 4 0.636 0.613 0.592 0.572 0.567 0.543 0.519 0.497
Q1/ Ipswich Corporation is considering an investment opportunity with the expected net cash inflows of $300,000 for four years. The residual value of the investment, at the end of four years, would be $70,000. The company uses a discount rate of 14%, and the initial investment is $290,000. Calculate the NPV of the investment. Present value of an ordinary annuity of $1: 12% 13% 14% 15% 0.893 0.885 0.877 0.87 2 1.69 1.668 1.647 1.626 3 2.402 2.361 2.322 2.283 4 3.037 2.974 2.914 2.855 3.605 3.517 3.433 3.352 Present value of $1: 12% 13% 14% 15% 1 0.893 0.885 0.877 0.87 0.797 0.783 0.769 0.756 3 0.712 0.693 0.675 0.658 4 0.636 0.613 0.592 0.572 0.567 0.543 0.519 0.497 Q2/ A company is evaluating an investment. The company uses the straight-line method of depreciation. Use the following information to compute the accounting rate of return. Show your calculations and round to one decimal place. Project Investment SR875,000 Residual value Operating income: Year 1 120,000 Year 2 120,000 Year…
The following expenses will be incurred by company X: next year = P50k, 2015 = P70k , 2016 = P100k and 2017 = P150k. To accumulate these sums, a fund is established by making equal year end deposits starting 2010 to 2015. If the fund earns 15% compounded annually, what is the required amount deposit? Select one: a. P42.375.716 b. P30,486.388 c. P37,455.777 d. P47,375.777
Problem 2 ABM Enterprise would like to evaluate/analyze an investment proposal. Given the following: Investment amount 450,000 (2022) Dividends / Revenue stream - 100,000 for the first year and an interval of 5,000 for the succeeding years Discount rate - 14% a. NPV for the perio 2023 through 2029; b. Total NPV using manual computation; c. Total NPV using the Excel function; and d. IRR rate.
Assume your organization wishes to make a Php 200,000 investment with a private equity firm in 2021. Taking into account all of the risks, the current discount rate is 12%, and the revenue stream/dividends are as follows: 2022 50002023 60002024 70002025 80002026 90002027 100002028 11000 Determine the following:a. NPV for the period 2022 through 2028;b. Total NPV using manual computation;c. Total NPV using the Excel function; andd. IRR rate.
Problem 01-04 (algo) A firm's current profits are $950,000, These prafits are expected to grow indefinitely at a constant annual rate of 6 percent. If the firm's apportunity cost of funds is 8 percent, determine the value of the firm: Instructions: Enter your respanses rounded to two decimal places. a. The instant before It pays out current profits as dividends. million b. The instant after it pays out current profits as dividends. million
Aa.14 Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of $177,085 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $82,000, with associated expenses of $28,500. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience’s tax rate is 30 percent. (Hint: The $177,085 advertising cost is an expense.)Required:1. Compute the payback period for the advertising program.2. Calculate the advertising program’s net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate calculations and final answer to the nearest whole dollar.)
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The firm invests $1,000 today, and realizes after tax cashflows in the amounts of $110, $660, and $880 at the ends of years 1-3, respectively. WACC=10%. Find NPV.
Pls help with below homework. KLC Mining is borrowing money from Superior National Bank to finance the construction of a new plant in Wisconsin. The bank will loan them $1,518.207 at 10% interest per year, compounded monthly. Find the after tax cost (effective yearly percentage rate) of raising capital by using this loan if the corporate tax rate is 30%?
A corporation makes an investment of $20,000 that will provide the following cash flows after the corresponding amounts of time:Year 1 - $10,000Year 2 - $10,000Year 3 - $2,000Should the company make this investment? What is the net present value at a 7 percent discount rate? Round your answer to two decimal points.

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