Question

In: Finance

An investment that Kevin is considering offers the following cash flows. Year 1 Initial investment of...

An investment that Kevin is considering offers the following cash flows.

Year 1 Initial investment of $10,000

Year 2 Inflow of $2,000

Year 3 Inflow of $1,500

Year 4 Additional investment of $5,000

Year 5 Inflow of $1,200

Year 6 Inflow of $2,200

Year 7 Inflow of 1,500

Year 8 Inflow of $1,000

Year 9 Inflow of $1,200

Year 10 Sale proceeds of $17,000

5. What is the internal rate of return (IRR) that this investment offers if all cash flows occur at the end of each period?

a. 10.10%

b. 10.87%

c. 9.24%

d. 9.74%.

Expert Solution

	10.8700%
Cash flows	Year	Discounted CF
-	0	0.00
(10,000.00)	1	-9019.57
2,000.00	2	1627.05
1,500.00	3	1100.65
(5,000.00)	4	-3309.13
1,200.00	5	716.33
2,200.00	6	1184.51
1,500.00	7	728.44
1,000.00	8	438.01
1,200.00	9	474.08
17,000.00	10	6057.71

IRR = 10.87% (use IRR function in Excel)

jeff jeffy answered 1 year ago

1. Machine Enterprises is considering an investment proposal with the following cash flows: Initial investment-depreciable assets...

1. Machine Enterprises is considering an investment proposal with the following cash flows: Initial investment-depreciable assets $45,000 Net cash inflows from operations (per year for 10 years) 5,000 Disinvestment 0 Determine the accounting rate of return on initial investment and the accounting rate of return on average investment. 2. Great Texas is considering a capital expenditure proposal that requires an initial investment of $9,460, has predicted cash inflows of $2,000 per year for 16 years, and has no salvage value....

PV of a Growing Annuity An investment offers the following cash flows: $1000 in one year,...

PV of a Growing Annuity An investment offers the following cash flows: $1000 in one year, followed by 9 more annual payments (years 2-10) that grow at a rate of 7% per year. If your opportunity cost is 8% per year, the PV today of this stream of cash flows is $______________. Margin of error for correct responses: +/- $.05.

Projects A B Cost (initial investment) 40000 250000 Year Cash flows of A Cash flows of...

Projects A B Cost (initial investment) 40000 250000 Year Cash flows of A Cash flows of B 1 10000 40000 2 10000 120000 3 10000 200000 4 10000 200000 5 10000 200000 6 10000 200000 What are the Payback Periods of Projects A, and B? Assume all cash flows are evenly spread throughout the year and already discounted. If the cut-off period ( الفتره المقبوله) is three years, which projects do you accept?

An investment has an initial cost of $1,000. The cash flows for the following four-year life...

An investment has an initial cost of $1,000. The cash flows for the following four-year life of project are $347, $394, $424, and $600. If discount rate is 14%, calculate the discounted payback period for this project. Round your answer to 4 decimal places.

A firm is considering an investment project with the following cash flows: Year 0 = -$110,000...

A firm is considering an investment project with the following cash flows: Year 0 = -$110,000 (initial costs); Year 1= $40,000; Year 2 =$90,000; and Year 3 = $30,000; and Year 4 = $60,000. The company has a 10% cost of capital. What is the project’s discounted payback? 1.67 years 1.86 years 1.99 years 2.08 years A firm is considering an investment project with the following cash flows: Year 0 = -$110,000 (initial costs); Year 1= $40,000; Year 2 =$90,000;...

Polk Products is considering an investment project with the following cash flows: Year Cash Flow 0...

Polk Products is considering an investment project with the following cash flows: Year Cash Flow 0 -$100,000 1. 20,000 2. 90,000 3. 30,000 4. 60,000 The company has a 10 percent cost of capital. What is the project's discounted payback? 1.86 years 1.67 years 2.67 years 2.49 years 2.33 years

An investment offers the following cash flows: $100 today, $550 one year from now, $550 in...

An investment offers the following cash flows: $100 today, $550 one year from now, $550 in 2 years, and $750 in 3 years. If the relevant interest rate is 8% per year (an APR, with interest compounded semiannually), what is the value of the investment 3 years from today?

You are considering building a shopping mall. The initial investment is $1.33 million. The cash flows...

You are considering building a shopping mall. The initial investment is $1.33 million. The cash flows are $480,000 for year 1, $250,000 for year 2. $160,000 for year 3, and $170,000 for year 4. What are the net present value (NPV), and profitability index (PI) of the project if the cost of capital is 7%? Compute the internal rate of return (IRR) for the project. What is the NPV of the shopping mall?

1. Assume the following cash flows for a convenience store project you are considering, the initial...

1. Assume the following cash flows for a convenience store project you are considering, the initial outflow is $660,000 followed by ten operating cash flows $123,550 in years 1 to 10. You will also receive a terminal cash flow of $438,500 also at year 10. Compute the IRR of the project given an interest rate of x (written as a decimal). Enter your answer as a decimal. 2. Assume the following cash flows for a convenience store project you are...

(1). What is the payback period of an investment with the following cash flows? Year ...

(1). What is the payback period of an investment with the following cash flows? Year Cash Flow 0 -60,000 1 30,000 2 20,000 3 15,000 4 10,000 5 5,000 (2). A project has the following cash flows: Year Cash Flow 0 -$4,000 1 2,000 2 2,000 3 2,000 4 2,000 Its cost of capital is 10 percent. What is the project’s discounted payback period?