Question
In: Finance
The first question:- below is the expected cash flow of the two investment opportunities (Project A,...
The first question:- below is the expected cash flow of the two
investment opportunities (Project A, Project B) available to
Rafidain, if you know that the net investment initial investment of
project (A) is JD 500,000, while the net investment for project B
is 600,000 JD. The company intends to finance the net investment
for both projects according to the following: 40% with long-term
loans, interest rate 8%, 40% in ordinary shares, if you know that
the risk-free rate is 2%, the existing risk premium is 10%, and the
beta is 1.5%. And 20% financing with retained profits. The tax rate
is 30%.
Project A: First year 200,000, second year 200,000, third year
150,000, fourth year 50,000.
The second project B: the first year 150,000, the second year
150,000, the third year 250,000, the fourth year 150,000.
REQUIRED ;- The two projects are required to be evaluated in the
light of
1- The standard of the period of recovery
2 - the price of the profitability index.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
An investment is expected to generate annual cash flows forever. The first annual cash flow is...
An investment is expected to generate annual cash flows forever.
The first annual cash flow is expected in 1 year and all subsequent
annual cash flows are expected to grow at a constant rate annually.
We know that the cash flow expected in 3 years from today is
expected to be $9,000 and the cash flow expected in 7 years from
today is expected to be $10,000. What is the cash flow expected to
be in 5 years from today?
An investment is expected to generate annual cash flows forever. The first annual cash flow is...
An investment is expected to generate annual cash flows forever.
The first annual cash flow is expected in 1 year and all subsequent
annual cash flows are expected to grow at a constant rate annually.
We know that the cash flow expected in 2 year(s) from today is
expected to be 1,860 dollars and the cash flow expected in 8 years
from today is expected to be 3,140 dollars. What is the cash flow
expected to be in 5 years...
CRA Company is considering three investment opportunities with cash flows as described below: Project C: Cash...
CRA Company is considering three investment opportunities with
cash flows as described below:
Project C:
Cash investment now………………………………… $ 16,000
Annual Cash inflow for 5 years……………………… $ 10,000
Cash outflow at the end of 3 years…………………..$ 3,000
Additional cash inflow at the end of 5 years………..
$12,000
Project R:
Cash investment now…………………………………. $ 7,000
Cash inflow at the end of 2 years……….…………… $ 18,000
Cash inflow at the end of 7 years……………………. $ 40,000
Project A:
Cash investment now………………………………….. $...
Suppose a venture's first cash flow is expected in Year 6, and the cash flow is...
Suppose a venture's first cash flow is expected in Year 6, and
the cash flow is expected to be 3,891,326. A comparable firm has
earnings of 31,104,064 and a market cap of 412,501,981. Assuming a
discount rate of 15%, find the present value (at Year 0) of the
firm in do
An investor with an investment horizon of two years has two investment opportunities: 1.The first investment...
An investor with an investment horizon of two years has two
investment opportunities:
1.The first investment opportunity is to invest in two-year
Treasury bond, yielding 5% per year.
2.The second opportunity is to invest in one-year Treasury bond
and then after one year, to roll over an investment into another
one year bond. If one year Treasury bond yields 4% and assuming
that Expectation Theory holds what should one year bond yield one
year from now? Explain fully and show...
Annual cash inflows from two competing investment opportunities are given below. Each investment opportunity will require...
Annual cash inflows from two competing investment opportunities
are given below. Each investment opportunity will require the same
initial investment. Compute the present value of the cash inflows
for each investment using a 20% discount rate.
Year
Investment X
Investment Y
1
$500
2,000
2
1,000
1,500
3
1,500
1,000
4
2,000
5,00
Total
$5,000
$5,000
At the end of three years, when you graduate from college, your
father has promised to give you a used car that will cost...
Mountain Brook Company is considering two investment opportunities whose cash flows are provided below: Year Investment...
Mountain Brook Company is considering two investment
opportunities whose cash flows are provided below:
Year
Investment A
Investment B
0
$
(15,000)
$
(9,000)
1
5,000
5,000
2
5,000
4,000
3
5,000
3,000
4
4,000
1,000
The company's hurdle rate is 12%. What is the present value index
of Investment A? (Do not round your PV factors and intermediate
calculations.)
Multiple Choice
1.01
1.00
0.97
None of these answers...
AS is evaluating a project that is expected to generate the following cash flow stream: Expected...
AS is evaluating a project that is expected to generate the
following cash flow stream:
Expected Cash Flow
Now -R 100,000
End-of-year 1 R 50,000
End-of-year 2 R 50,000
End-of-year 3 R 50,000
Required:
2.1. If the project’s cost of capital is 12 per cent, what is
the present value of the project’s
expected cash flow stream?
2.2. What is the net present value of the project?
1. Consider the investment projects given in the table below. Net Cash Flow of Project Year...
1. Consider the
investment projects given in the table below.
Net Cash Flow of Project
Year
A
B
C
0
($1,500)
($5,000)
($2,200)
1
$700
$3,000
$1,600
2
$2,500
$4,500
$2,600
a. Compute the IRR for each
project.
b. On the basis of IRR
criteria, if all three projects are mutually exclusive
investments, which project
should be selected at 15% MARR?
c. Create a set of decision
statements for varying MARR from 0% to 60%.
(Do
not provide statements...
BTS corporation has two investment plans A,B and expected to get $1200 of cash flow in...
BTS corporation has two investment plans A,B and expected to get
$1200 of cash flow in 1 year. The investment plan A's β is 1.0 and
plan b β is 1.5. If the risk-free interest rate is
10% and market risk premium is 10%, please answer the
following question.
Beta fo BTS = (1+1.5)/2 =
1.25
Required return = 10%+1.5*10% =
25.00%
PV for BTS = 1200/1.25 =
$ 960.00
Note:
It is assumed that the cash flow of $1,200...
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