Question
In: Finance
You are considering a project that costs $500 to invest in today, and will pay you...
- You are considering a project that costs $500 to invest in today, and will pay you $100 next year. The cash inflow will grow at a constant rate of 3% per year after year 1, and you will receive cash inflows for 20 years (total including the first year CF). Your discount rate is 16%. What is the NPV of the project? Also, what would the NPV be if the cash inflows continued forever? Show your work.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
You are considering a project that costs $500 to invest in today, and will pay you...
You are considering a project that costs $500 to invest in
today, and will pay you $100 next year, $50 in two years, and $100
in three years. The cash inflow will grow at a constant rate of 3%
per year after year 3, and you will receive cash inflows for 25
years (total including the first three CFs). Your discount rate is
14%. What is the NPV of the project? Also, what would the NPV be if
the cash...
You are considering a project that costs $500 to invest in today, and will pay you $100 next year, $50 in two years, and $100 in three years.
You are considering a project that costs $500 to invest in today, and will pay you $100 next year, $50 in two years, and $100 in three years. The cash inflow will grow at a constant rate of 3% per year after year 3, and you will receive cash inflows for 25 years (total including the first three CFs). Your discount rate is 14%. What is the NPV of the project? Also, what would the NPV be if the cash...
You are considering a project that costs $500 to invest in today, and will pay you $100 next year, $50 in two years, and $100 in three years.
You are considering a project that costs $500 to invest in today, and will pay you $100 next year, $50 in two years, and $100 in three years. The cash inflow will grow at a constant rate of 3% per year after year 3, and you will receive cash inflows for 25 years (total including the first three CFs). Your discount rate is 14%. What is the NPV of the project? Also, what would the NPV be if the...
You are planning to invest in a project which costs $40 million today. The project will...
You are planning to invest in a project which costs $40 million
today. The project will produce returns of $4 million per year for
five years and the scrap value will be $20 million. That is, you
will receive $4 million at the end of the year, for each of the
next five years, and you will receive $20 million at the end of the
fifth year.
Question (a) [2 marks] What is the net present value of the
project...
You are considering a project that costs $17,000 today and will generate cash flows of $7,250...
You are considering a project that costs $17,000 today and will
generate cash flows of $7,250 per year for 3 years. Calculate the
IRR for this project.
Question 2 options:
13.00%
13.41%
14.02%
15.01%
You invest in a project that will pay you $500 per year for 5 years and then pays $750 per year for the following 10 years
You invest in a project that will pay you $500 per year for 5 years and then pays $750 per year for the following 10 years (assume that all payments are made at the end of the year). You require a 6% rate of return on this type of investment. Give your return requirement, what is the maximum amount that you would be willing to pay today for the cash flow stram associated with this project? Round only your final...
Today, you invest $7,000 in an investment that will pay $14,000in 11 years. What is...
Today, you invest $7,000 in an investment that will pay $14,000
in 11 years. What is the implied rate of interest?
Today, you invest $3,000 in an investment that will pay $6,000 in 7 years. What is...
Today, you invest $3,000 in an investment that will pay $6,000
in 7 years. What is the implied rate of interest?
There are two projects that the company is considering: Project A costs 10,000 to implement today,...
There are two projects that the company is considering:
Project A costs 10,000 to implement today, and it brings
subsequent cash flows of 5,900 at the end of year 1; 2,000 at the
end of year 2; 5,000 at the end of year 3.
Project B's initial cost is 7,500, and subsequent cash flows
are 5,000 per year for 3 years.
WACC is 8% for both projects.
Calculate NPV and IRR for each project, and decide which to
recommend.
There are two projects that the company is considering: Project A costs 10,000 to implement today,...
There are two projects that the company is considering:
Project A costs 10,000 to implement today, and it brings
subsequent cash flows of 5,000 at the end of year 1; 4,000 at the
end of year 2; 6,000 at the end of year 3.
Project B's initial cost is 12,000, and subsequent cash flows
are 6,000 per year for 3 years.
WACC is 8% for both projects.
a. Calculate NPV and IRR for each project, and decide which one
to...
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