In: Finance

1. Managers of CVS Pharmacy are considering a new project. This project would be a new store in Odessa, Texas. They calculate that the NPV for this project is -$300,000. What decision should the managers make, and why?

A. Accept the project, because NPV is positive.

B. Reject the project, because NPV is negative.

c. Accept the project, because NPV is negative.

D. Reject the project, because NPV is positive.

2. Olympus Property Management owns two million square feet of land (about 46 acres) in the Woodlands. The managers have two projects for developing this property:

- Galleria West Shopping Plaza, NPV = $11 billion
- Ben Dover Office Complex, NPV = $13 billion

Once developed, Olympus will manage the property for 30 years. The property has space for only one or the other of these projects.

Which project(s) should the management at Olympus Property choose, and why?

A. Ben Dover Office Complex, because it has the higher NPV, and its NPV > 0.

B. Galleria West Shopping Plaza, because it has the higher NPV, and its NPV > 0.

C. Both projects, because both have positive NPV.

D. Neither project, because both have negative NPV.

1. Managers of CVS Pharmacy are considering a new project. This project would be a new store in Odessa, Texas. They calculate that the NPV for this project is -$300,000. What decision should the managers make, and why?

B. Reject the project, because NPV is negative.

Explanation : Negative NPV will reduce the value of the company.

2. Olympus Property Management owns two million square feet of land (about 46 acres) in the Woodlands. The managers have two projects for developing this property:

- Galleria West Shopping Plaza, NPV = $11 billion
- Ben Dover Office Complex, NPV = $13 billion

Once developed, Olympus will manage the property for 30 years. The property has space for only one or the other of these projects.

Which project(s) should the management at Olympus Property choose, and why?

B. Galleria West Shopping Plaza, because it has the higher NPV, and its NPV > 0.

Explanation : Higher NPV will increase the value of the company.

1. Managers of CVS Pharmacy are considering a new project. This
project would be a new store in Odessa, Texas. They estimate the
following expected net cash flows if the project is adopted.
Year 0: ($1,250,000)
Year 1: $200,000
Year 2: $500,000
Year 3: $400,000
Year 4: $300,000
Year 5: $200,000
Suppose that the appropriate discount rate for this project is
6.7%, compounded annually.
Calculate the net present value for this proposed project.
Do not round at intermediate steps in...

Managers of CVS Pharmacy are considering a new project. This
project would be a new store in Odessa, Texas. They estimate the
following expected net cash flows if the project is adopted. Year
0: ($1,250,000) Year 1: $200,000 Year 2: $500,000 Year 3: $400,000
Year 4: $300,000 Year 5: $200,000 Suppose that the appropriate
discount rate for this project is 7.7%, compounded annually.
Calculate the net present value for this proposed project. Do not
round at intermediate steps in your...

Managers of CVS Pharmacy are considering a new project. This
project would be a new store in Odessa, Texas. They estimate the
following expected net cash flows if the project is adopted.
Year 0: ($1,250,000)
Year 1: $200,000
Year 2: $500,000
Year 3: $400,000
Year 4: $300,000
Year 5: $200,000
Suppose that the appropriate discount rate for this project is
5.2%, compounded annually.
Calculate the net present value for this proposed project.
Do not round at intermediate steps in your...

Assume you are the Design/Build Contractor for a CVS Pharmacy in
Logan, OH. The building is 11,945 square feet in size with
construction scheduled to commence on January 18, 2017. Use the
progress completion schedule from a similar CVS Pharmacy in Athens,
OH, to organize the overall schedule for the project by weekly
progress for a completion date (turn over to owner) on May 23,
2017.
1. Progress in one week: awnings, landscaping, permanent electrical
power, gas service
2. Progress...

The CVS Pharmacy located on US 17 in Murrells Inlet has been one
of the busiest pharmaceutical retail stores in South Carolina for
many years. To try and capture more business in the area, CVS top
management opened another store about 6 miles west on SC 707. After
a few months, CVS management decided to compare the business volume
at the two stores. One way to measure business volume is to count
the number of cars in the store parking...

The CVS Pharmacy located on US 17 in Murrells Inlet has been one
of the busiest pharmaceutical retail stores in South Carolina for
many years. To try and capture more business in the area, CVS top
management opened another store about 6 miles west on SC 707. After
a few months, CVS management decided to compare the business volume
at the two stores. One way to measure business volume is to count
the number of cars in the store parking...

The manager of Keebee, Inc. is considering a new project that
would require an initial investment of $1,197,810. The
cost of capital or the required rate of return of this company is
10 percent. This project will generate an annual cash
inflow of $300,000 in the following five years.
Calculate the net present value (NPV) of this
project. Indicate whether or not this project is
acceptable.
Calculate the internal rate of return (IRR) of this
project.

Coffee-Cola is considering a project for a new bottled beverage
called Lots-A-Latte. The project would require new assets today
costing $320,000 that would be depreciated using 3-year MACRS
Depreciation (yr 1: 33%, yr 2: 45%, yr 3: 15%, yr 4: 7%).
Additional net working capital of $15,000 would be needed at the
beginning of the projectâ€™s life and would be recovered at the end
of the project. The project has a 3-year expected useful life with
an expected salvage value...

Temple Corp. is considering a new project whose data are shown
below. The equipment that would be used has a 3-year tax life,
would be depreciated by the straight-line method over its 3-year
life, and would have a zero salvage value. No change in net
operating working capital would be required. Revenues and other
operating costs are expected to be constant over the project's
3-year life. What is the project's NPV? Do not round the
intermediate calculations and round the...

Temple Corp is considering a new project whose data are shown
below. The equipment that would be used has a 3-year tax life,
would be depreciated by the straight-line method over its 3-year
life, and would have a zero salvage life. No change in net
operating working capital would be required. Revenues and other
operating costs are expected to be constant over the project's
3-year life. What is the project's NPV?
Risk-adjusted WACC
10.0%
Net investment cost (depreciable basis)
$65,000...

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