Question
In: Finance
Project A has a total present value of future cash flows of $98,200 and a cost...
Project A has a total present value of future cash flows of $98,200 and a cost of $102,000. Project B has a total present value of future cash flows of $386,911 and a cost of $287,211. Project C has a total present value of future cash flows of $784,000 and a cost of $668,000. Project D has a total present value of future cash flows of $119,865 and a cost of $98,770. Which of these projects has the highest Profitability Index?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
A project requires an initial cost of $225,000; has a present value of operating cash flows...
A project requires an initial cost of $225,000; has a present
value of operating cash flows over its ten-year life of $310,000;
and has a book value at the end of 10 years of $120,000. Current
assets of $20,000, and current liabilities of $4,000 will be needed
for the project to begin. Calculate the terminal value and NPV
using its book value after 10 years, assuming a 15 percent discount
rate.
CMA Ltd currently has an enterprise value (that is, present value of future free cash flows)...
CMA Ltd currently has an enterprise value (that is, present
value of future free cash flows) of $400 million and $100 million
in excess cash. The firm has 10 million shares outstanding and no
debt. Suppose CMA uses its excess cash to repurchase shares. In the
near future there news is scheduled to come out that will change
AMC's enterprise value to either $600 million or $200 million.
Suppose CMA management expects good news to come out. If
management’s goal...
The price of a security is the…?A the present value of all future cash flows....
The price of a security is the…?A the present value of all future cash flows.B sum of all future profits.C the future value of all the future profits net of interest
payments and taxes.D the future value of all current dividends. geometric average
of all past prices.
Net present value. Quark Industries has a project with the following projected cash flows: Initial cost:...
Net present value. Quark Industries has a project with the
following projected cash flows: Initial cost: $210,000 Cash flow
year one: $25,000 Cash flow year two: $72,000 Cash flow year
three: $146,000 Cash flow year four: $146,000 a. Using a
discount rate of 11% for this project and the NPV model,
determine whether the company should accept or reject this project.
b. Should the company accept or reject it using a discount rate of
13%? c. Should the company accept...
Net present value. Quark Industries has a project with the following projected cash flows: Initial cost:...
Net present value. Quark Industries has a
project with the following projected cash flows:
Initial cost: $270,000
Cash flow year one: $24,000
Cash flow year two: $79,000
Cash flow year three: $155,000
Cash flow year four: $155,000
a. Using a discount rate of 10% for this
project and the NPV model, determine whether the company should
accept or reject this project.
b. Should the company accept or reject it using
a discount rate of 13%?
c. Should the company accept...
Net present value. Lepton Industries has a project with the following projected cash flows: Initial cost:...
Net present value. Lepton Industries has a
project with the following projected cash flows:
Initial cost: $460,000
Cash flow year one: $132,000
Cash flow year two: $200,000
Cash flow year three: $191,000
Cash flow year four: $132,000
a. Using a discount rate of 11% for this
project and the NPV model, determine whether the company should
accept or reject this project.
b. Should the company accept or reject it using
a discount rate of 13%?
c. Should the company accept...
The present value of an annuity is the sum of the discounted value of all future cash flows.
Present value of annuities and annuity
paymentsThe present value of an annuity is the sum of the discounted
value of all future cash flows.You have the opportunity to invest in several annuities. Which
of the following 10-year annuities has the greatest present value
(PV)? Assume that all annuities earn the same positive interest
rate.An annuity that pays $500 at the end of every six monthsAn annuity that pays $1,000 at the beginning of each yearAn annuity that pays $500 at...
An investment costs $200,000. If the present value (PV) of all the future cash flows is...
An investment costs $200,000. If the present value (PV) of all
the future cash flows is $175,000, which of the following
statements is correct?
a.
The project should be rejected since the Profitability Index is
less than 1.
b.
The project should be rejected since the NPV is $25,000.
c.
The project should be accepted since the Profitability Index is
greater than 0
d.
The project should be rejected since the NPV is -$175,000.
1. A project has a total up-front cost of $435.44. The cash flows are $100 in...
1. A project has a total up-front cost of $435.44. The cash
flows are $100 in the first year, $200 in the second year, and $300
in the third year. What’s the IRR? If we require an 18 percent
return, should we take this investment?
A project has the following total (or net) cash flows. ________________________________________
A project has the following total (or net) cash flows.
________________________________________
Year Total (or net)
cash flow
________________________________________
1 $50,000
2 70,000
3 80,000
4 100,000
_______________________________________
The required rate of return on the project is 13 percent. The
initial investment (or initial cost or initial outlay) of the
project is $100,000.
a) Find the (regular) payback period of the project.
b) Compute the discounted payback period of the project.
6. A project has the following...
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