Question
In: Finance
Risky Business is looking at a project with the estimated cash flow as follows: Initial investment...
Risky Business is looking at a project with the estimated cash flow as follows:
Initial investment at start of project:$12,200,000
Cash flow at end of year one: $2,196,000
Cash flow at end of years two through six:$2,440,000 each year
Cash flow at end of years seven through nine:$2,635,200 each year
Cash flow at end of year ten: $2,027,077
Risky Business wants to know the payback period, NPV, IRR, and PI of this project. The appropriate discount rate for the project is 13%. If the cutoff period is six years for major projects, determine whether the management at Risky Business will accept or reject the project under the five different decision models.
What is the payback period for the new project at Risky Business?
____years (Round to two decimal places.)
Under the payback period, this project would be Accepted or rejected?
What is the NPV for the project at Risky Business?
$____(Round to the nearest cent.)
Under the NPV rule, this project would be Accepted or rejected?
What is the IRR for the new project at Risky Business?
____% (Round to two decimal places.)
Under the IRR rule, this project would be Accepted or rejected?
What is the PI for the new project at Risky Business?
______ (Round to two decimal places.)
Under the PI rule, this project would be Accepted or rejected?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Risky Business is looking at a project with the following estimated cash flow: Initial investment at...
Risky Business is looking at a project with the following
estimated cash flow:
Initial investment at start of project: $10,000,000
Cash flow at end of year one: $1,700,000
Cash flow at end of years two through six: $2,000 each
year
Cash flow at end of years seven through nine: $2,040,000 each
year
Cash flow at end of year ten: $1,569,231
Risky Business wants to know the payback period, NPV, IRR,
MIRR, and PI of this project. The
appropriate discount rate...
Comparing all methods. Risky Business is looking at a project with the estimated cash flow as?...
Comparing all methods. Risky Business is looking at a project
with the estimated cash flow as? follows: Initial investment at
start of? project:???$12 comma 600 comma 000 Cash flow at end of
year? one:???$2 comma 268 comma 000 Cash flow at end of years two
through? six:???$2 comma 520 comma 000 each year Cash flow at end
of years seven through? nine:???$2 comma 948 comma 400 each year
Cash flow at end of year? ten:???$2 comma 268 comma 000 Risky...
Comparing all methods. Risky Business is looking at a project with the following estimated cash flow:...
Comparing all methods. Risky Business is looking at a project
with the following estimated cash flow: Risky Business wants to
know the payback period, NPV, IRR, MIRR, and PI of this project.
The appropriate discount rate for the project is 12%. If the
cutoff period is 6 years for major projects, determine whether the
management at Risky Business will accept or reject the project
under the five different decision models.
What is the payback period for the new project at...
Comparing all methods. Risky Business is looking at a project with the following estimated cash flow:...
Comparing all methods. Risky Business is looking at a project
with the following estimated cash flow: Initial investment at
start of project: $12,300,000 Cash flow at end of year one:
$2,214,000 Cash flow at end of years two through six: $2,460,000
each year Cash flow at end of years seven through nine:
$2,878,200 each year Cash flow at end of year ten: $2,214,000
Risky Business wants to know the payback period, NPV, IRR, MIRR,
and PI of this project. The...
Comparing all methods. Risky Business is looking at a project with the following estimated cash flow:...
Comparing all methods. Risky Business is looking at a project
with the following estimated cash flow:
Initial investment at start of project: $10,700,000
Cash flow at end of year one: $1,819,000
Cash flow at end of years two through six: $2,140,000 each
year
Cash flow at end of years seven through nine: $2,000,900 each
year
Cash flow at end of year ten: $1,539,154
Risky Business wants to know the payback period, NPV, IRR,
MIRR, and PI of this project. The...
A project requires an initial investment of $200,000 and expects to produce a cash flow before...
A project requires an initial investment of $200,000 and expects
to produce a cash flow before taxes of $120,000 per year for two
years (i.e., cash flows will occur at t = 1 and t = 2). The
corporate tax rate is 21 percent. The assets will depreciate using
the MACRS 3-year schedule: (t = 1, 33%); (t = 2: 45%); (t = 3:
15%); (t = 4: 7%). The company's tax situation is such that it can
use all...
You are considering a project with an initial investment of $14 million and annual cash flow...
You are considering a project with an initial investment of $14
million and annual cash flow (before interest and taxes) of
$2,000,000. The project’s cash flow is expected to continue
forever. The tax rate is 34%, the firm’s unlevered cost of equity
is 12% and its pre-tax cost of debt is 10%. The only side-effect
from the use of debt that you are concerned about is related to the
tax shield.
If the project were to be financed with 100%...
Following table shows the initial investment required in and cash flow (return) from a project
Following table shows the initial investment required in and cash flow (return) from a project: The expected payback period from the project is 2 years and the discount rate is 14%. Based on the Discounted Payback Period, will you accept the project?
Initial Cash flow investment Project A $5 million $2 million per year for four years Project...
Initial Cash flow
investment
Project A $5 million $2 million per year for
four years
Project B $3 million $1 million per year for five
years
Project C $2 million $1 million per year for four
years
Project D $3 million $1.5 million per year for
three years
An investor has a budget of $5 million. He can invest in the
projects shown above. If the cost of capital is 6%, what investment
or investments should he make?
Select one:...
Consider a project whose net cash flow streams, Fn , are as follows  
Consider a project whose net cash flow streams, Fn ,
are as follows
n
E(Fn)
Var(Fn)
0
-$10
9
1
3
4
2
8
16
3
10
25
In addition, the correlation coefficient among the
Fn’s are known to be ρ01 = ρ02 =
ρ03 = 0.5 and ρ12 = ρ23 =
ρ13 = 1. Assuming i = 10%, compute the mean and variance
of the PV for the project.
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