Question

In: Finance

In the following exercise, calculate the net present value (NPV) at a required return of 15...

In the following exercise, calculate the net present value (NPV) at a required return of 15 percent.

Year                                          Cash Flow

  0                                 -$1,000 (initial investment)

1                                               95

2                                                  55

Present value = (Future value) / (1+rate)^2 .

Solutions

Expert Solution

Ans NPV = -$875.80

Year Project Cash Flows (i) DF@ 15% DF@ 15% (ii) PV of Project ( (i) * (ii) )
0 -1000 1 1                             (1,000.00)
1 95 1/((1+15%)^1) 0.869565                                     82.61
2 55 1/((1+15%)^2) 0.756144                                     41.59
NPV                                (875.80)

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

The NPV (net present value) of Plan Alpha is $ (130,539) The NPV (net present value)...
The NPV (net present value) of Plan Alpha is $ (130,539) The NPV (net present value) of Plan Beta is $ 233,001 The IRR (internal rate of return) of Plan Alpha is $ 19.36 %. The IRR (internal rate of return) of Plan Beta is $ 21.25 %. Which​ plan, if​ any, should the company​ pursue? Based on the results​ above, the company should pursue Plan Beta because the NPV is positive and the IRR is greater than the​ company's...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Cute Camel Woodcraft Company: Last Tuesday, Cute Camel Woodcraft Company lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Gamma is...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Blue Hamster Manufacturing Inc.: Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Delta is...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Cold Goose Metal Works Inc.: Last Tuesday, Cold Goose Metal Works Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return...
3. Understanding the IRR and NPV The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Cute Camel Woodcraft Company: Last Tuesday, Cute Camel Woodcraft Company lost a portion of its planning and financial data when both its main and its backup servers crashed. The company’s CFO remembers that the internal rate of return (IRR) of Project Zeta is...
Net present value (NPV)The net present value (NPV) rule is considered one of the most...
Net present value (NPV)The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions.Consider this case:Suppose Pheasant Pharmaceuticals is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,225,000. The project is expected to generate the following net cash flows:YearCash FlowYear 1$275,000Year 2$475,000Year 3$450,000Year 4$450,000Pheasant Pharmaceuticals’s weighted average cost of capital is 8%, and project Beta has the same risk as the...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Cold Goose Metal Works Inc. is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $450,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $325,000 Year 2...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Happy Dog Soap Company is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $3,000,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $300,000 Year 2 $475,000...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,225,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $300,000 Year 2 $400,000 Year...
·How do you calculate Payback Period, Net Present Value (NPV), Internal Rate of Return (IRR), and...
·How do you calculate Payback Period, Net Present Value (NPV), Internal Rate of Return (IRR), and Modified Internal Rate of Return (MIRR) for a given project and evaluate projects using each method? Explanation and example.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT