Question
In: Finance
The project has the following cash flows and salvage values and cost of capital 8%: Year...
The project has the following cash flows and salvage values and cost of capital 8%:
|
Year |
Cash flows |
Salvage |
|
0 |
-5000 |
4000 |
|
1 |
2500 |
3500 |
|
2 |
3200 |
1800 |
|
3 |
1600 |
900 |
|
4 |
1000 |
0 |
What are the physical life and the economic life for this project?
A. Physical life of this project is 3 years with economic life of 4
years.
B. Physical life of this project is 4 years with economic life of 1
year.
C. Physical life of this project is 4 years with economic life of 2
years.
D. Physical life of this project is 4 years with economic life of 4
years.
E. Physical life of this project is 4 years with economic life of 3
years.
Solutions
Expert Solution
Economic life is the life during which an asset provides some value to the owner while the physical life is the life over which the asset is in use. In the above example, the asset provides some economic value to the owner upto the end of Years 3 when its salvage value is 900 while physical life of asset is 4 years.
Answer is E. Physical life of this project is 4 years with economic life of 3 years.
jeff jeffy answered 2 years agoRelated Solutions
You are considering the following project. Your cost of capital is 8%. The cash flows are...
You are considering the following project. Your cost of capital
is 8%. The cash flows are as follow:
Year
0
1
2
3
4
-1000
300
500
300
300
What is the NPV of the project?
A.
165
B.
296
C.
400
D.
1400
Consider the below estimated cash flows for Project A. Assume the cost of capital is 8%.
Consider the below estimated cash flows for Project A. Assume the cost of capital is 8%.
Year
Project A
0
($30,000)
1
$8,000
2
$9,000
3
$7,000
4
$10,000
8. Find the net present value (NPV) of Project A’s projected cash flows.
a.
$4,000
b.
($3,200)
c.
($1,824)
d.
$1,754
e.
($1,969)
9. Find the Internal Rate of Return (IRR) Project A’s projected cash flows.
a.
13.3%
b.
8.0%
c.
6.3%
...
Project A has the following Cash Flows: Cost = $1,200,000; Cash flows the following years as...
Project A has the following Cash Flows: Cost = $1,200,000; Cash
flows the following years as follows: Year 1 = $274,600; Year 2 =
$298,000; Year 3 = $303,950; Year 4 = $312,875; and Year 5 =
$374,600. Calculate the Traditional Payback. Assume cash flows are
even throughout the year. Calculate the Net Present Value using the
WACC = 8.28%.
The cash flows and Net salvage value of Project X is given the following table: Year...
The cash flows and Net salvage value of Project X is
given the following table:
Year
Cash flows
Salvage Value
0
-5,800
4,800
1
2,100
3,000
2
3,400
2,200
3
3,600
1,800
4
1,800
0
Based on the Economic Life of this project and the cost of
capital is 12%, in what year should you abandoning this Project
X?
A. Year 3, since NPV in year 3 = $8,429
B. Year 3, since NPV in year 3 = $2,629
C....
Given a project with the following cash flows and a cost of capital of 9%. Calculate...
Given a project with the following cash flows and a cost
of capital of 9%. Calculate the NPV, IRR, MIRR, PI, payback and
discounted payback. For each of the six calculations, give a brief
interpretation of what it measures and how it should be used to
evaluate a project. Should the project be accepted? Why or why
not?
Time Period Cash Flow
0 -$200,000
1 $50,000
2 $70,000
3 -$80,000
4 $75,000
5 $100,000...
8. Project R has a cost of $ 10,000 and in expected to produce cash flows...
8. Project R has a cost of $ 10,000 and in expected to produce
cash flows per year of $ 4,000 for 3 years. Project S has a cost of
$20,000 and in expected to produce cash flows of $ 7,000 per year
for 4 years. Calculate the 2 projects' NPVs, IRRs, MIRRs, and PIs,
assuming a cost of capital of 11%. Which project should be selected
?
Project B has the following Cash Flows: Cost = $800,000; Year 1 = $329,000; Year 2...
Project B has the following Cash Flows: Cost = $800,000; Year 1
= $329,000; Year 2 = $260,750; Year 3 = $192,500; Year 4 =
$147,000; Year 5 = $101,500. Calculate the Internal Rate of Return
for Project B.
Project B has the following Cash Flows: Cost = $800,000; Year 1 = $329,000; Year 2...
Project B has the following Cash Flows: Cost = $800,000; Year 1
= $329,000; Year 2 = $260,750; Year 3 = $192,500; Year 4 =
$147,000; Year 5 = $101,500. Calculate the Net Present Value when
using a WACC of 8.28%.
Q3 A 50- year project has a cost of $500,000 and has annual cash flows of...
Q3
A 50- year project has a cost of $500,000 and has annual cash flows
of $100,000 in years 1-25, and $200,000 in years 26-50. The
company's required rate is 8%. Given this information, calculate
the profitability index of the project.
Question 3 options: 2.46
2.16
2.76
2.06
1.76
A 50-year project has a cost of $500,000 and has annual cash flows of $100,000 in...
A 50-year project has a cost of $500,000 and has annual cash
flows of $100,000 in years 1-25, and $200,000 in years 26-50. The
company's required rate is 8%. Given this information, calculate
the NPV of the project.
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