Question

In: Finance

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:

A. Project A

B. Project B

C. Project B and Project C

D. Project C and Project D

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

JUST WRITTEN IN EXCEL, NO EXCEL FUNCTION IS USED

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

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%...
3. A 5-year project requires an initial investment of $28 million. It generates an annual cash...
3. A 5-year project requires an initial investment of $28 million. It generates an annual cash flow of $9 million. The unlevered cost of equity is 20%. A loan of $22.5 million at a rate of 10%. Principal will be repaid in a lump sum when project ends. However, the lender will extend the loan for only three years. The firm’s tax rate is 30%. Calculate the project’s adjusted present value.
A company is planning a four-year project, with an initial cost of $1.67 million. This investment...
A company is planning a four-year project, with an initial cost of $1.67 million. This investment cost is amortized to zero over four years on a straight-line basis. However, the asset could be disposed of for $435,000 in four years. The project requires $198,000 in working capital initially and is fully recoverable after the project is completed. The project generates $1,850,000 in sales and $1,038,000 in costs each year. If the tax rate is 21% and the required return rate...
A project will produce an operating cash flow of $15,200 a year for four years. The...
A project will produce an operating cash flow of $15,200 a year for four years. The initial cash investment in the project will be $50,000. The net after-tax salvage value is estimated at $4,000 and will be received during the last year of the project’s life. What is the internal rate of return for this project? Should the project be accepted if the cost of capital is 10%? Group of answer choices 8.31%; No, project should be rejected 10.81%; Yes,...
A project will produce an operating cash flow of $295,000 a year for four years. The...
A project will produce an operating cash flow of $295,000 a year for four years. The initial cash outlay for equipment will be $721,000. The net aftertax salvage value of $72,000 will be received at the end of the project. The project requires $79,000 of net working capital that will be fully recovered when the project ends. What is the net present value of the project if the required rate of return is 15 percent? $114,372 $121,017 $128,553 $136,764 $144,915
A project will produce an operating cash flow of $445,000 a year for four years. The...
A project will produce an operating cash flow of $445,000 a year for four years. The initial cash outlay for equipment will be $1,195,000. The net aftertax salvage value of $61,000 will be received at the end of the project. The project requires 87,000 of net working capital up front that will be fully recovered. What is the net present value of the project if the required rate of return is 12 percent? $146,800.23 $181,219.28 $154,036.37 $172,811.69 $163,677.13
A project will produce an operating cash flow of $445,000 a year for four years. The...
A project will produce an operating cash flow of $445,000 a year for four years. The initial cash outlay for equipment will be $1,195,000. The net aftertax salvage value of $61,000 will be received at the end of the project. The project requires 87,000 of net working capital up front that will be fully recovered. What is the net present value of the project if the required rate of return is 12 percent? $146,800.23 $181,219.28 $154,036.37 $172,811.69 $163,677.13
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...
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...
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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT