Question

In: Accounting

Use the following information to calculate the NPV for an overseas expansion: Year Cash Flow 0...

Use the following information to calculate the NPV for an overseas expansion:

Year

Cash Flow

0

-$25,000

1

10,000

2

20,000

3

30,000

What is the NPV at a required return of 7%?  Should the firm accept the project?  What if the required return is 14%?

Solutions

Expert Solution

Ans. NPV at 7% :-
Year Cash Flow PV Factor Present Value of Cash Flow
0        (25,000) -                         (25,000)
1           10,000 0.935                              9,346
2           20,000 0.873                            17,469
3           30,000 0.816                            24,489
Total Net present value                            26,304
Yes, the firm has to accept the project.
NPV at 14% :-
Year Cash Flow PV Factor Present Value of Cash Flow
0        (25,000) -                         (25,000)
1           10,000 0.877                              8,772
2           20,000 0.769                            15,389
3           30,000 0.675                            20,249
Total Net present value                            19,410
Yes, the firm has to accept the project.

v


Related Solutions

Use the following information to create a 1-year cash flow and calculate the following metrics: LTV,...
Use the following information to create a 1-year cash flow and calculate the following metrics: LTV, DSCR, DY, Breakeven point, Going in Cap Rate and Cash on Cash return Total Acquisition Price is $1,056,000 •Property consists of eight office suites, Three on the first floor and five on the second floor •Contract rents are: two suites at $1,800/mo, one at $3,600/mo and five at $1,560/mo •Vacancy and collection losses are 10% per year •Operating expenses are 40% of EGI •CapEx...
Use the following cash flow with a 5% discount rate: Year Cash Flow 0 -$ 80,000...
Use the following cash flow with a 5% discount rate: Year Cash Flow 0 -$ 80,000 1 20,000 2 15,000 3 20,000 4 25,000 5 30,000 What is the NPV? $ 9,154 -$2,567 $14,003 $10,036
Calculate the NPV given the following cash​ flows YEAR   CASH FLOWS 0 -60,000 1 25,000 2...
Calculate the NPV given the following cash​ flows YEAR   CASH FLOWS 0 -60,000 1 25,000 2 25,000 3 15,000 4 15,000 5 10,000 6   10,000 if the appropriate required rate of return is 8 percent. Should the project be​ accepted? What is the​ project's NPV​?
Use the Free Cash Flow method of valuation and the following information, to calculate the value...
Use the Free Cash Flow method of valuation and the following information, to calculate the value for a venture with the following information. Expected sales at year zero (or beginning of year 1): $2.50 M; growth rate in sales for the first 8 years: 35%; and for years 9-on: 10%; Annual profit margin (or EBIAT/Sales) for all years=22%; Annual asset intensity ratio (or (FA+WC)/Sales) for all years = 32%; discount rate in years 1-8: 30%, and in years 9-on: 16%....
calculate the NPV for the following: the project costs $50,000 upfront and cash flow is $13,000...
calculate the NPV for the following: the project costs $50,000 upfront and cash flow is $13,000 per year for the next six years. Use a 9% discount rate.
For the following set of cash flows, Year Cash Flow 0 –$8,700 Year1 Cash Flow $5,600...
For the following set of cash flows, Year Cash Flow 0 –$8,700 Year1 Cash Flow $5,600 Year 2 Cash Flow $6,100 Year 3 Cash Flow $4,300 a. What is the NPV at a discount rate of 0 percent? b. What is the NPV at a discount rate of 12 percent? c. What is the NPV at a discount rate of 24 percent? d. What is the NPV at a discount rate of 29 percent?
use the following information and the cash flow formula from chapter two To calculate interest paid....
use the following information and the cash flow formula from chapter two To calculate interest paid. Change in net working capital 13,000 operating cash flow 105,000 dividends paid 41,000 net capital spending 35,000 net new borrowing 17,000 net new equity issued 13,000
What is the Net Present Value of the following cash flow stream? Year Cash Flow 0...
What is the Net Present Value of the following cash flow stream? Year Cash Flow 0 -$489 1 $363 2 $192 3 $161 4 $256 Assume an interest rate of 13% Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. If your answer is negative, enter your answer as a negative number rounded off to two decimal points.
Consider the following two projects: Project Year 0 Cash Flow Year 1 Cash Flow Year 2...
Consider the following two projects: Project Year 0 Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow Year 4 Cash Flow Discount Rate A -100 40 50 60 N/A .15 B -73 30 30 30 30 .15 Assume that projects A and B are mutually exclusive. The correct investment decision and the best rational for that decision is to: Group of answer choices a.invest in project A since NPVB < NPVA. b.invest in project B...
Calculate the After-Tax Cash Flow, NPV (at minimum ROR=20%) and ROR for the following investment with...
Calculate the After-Tax Cash Flow, NPV (at minimum ROR=20%) and ROR for the following investment with 6 years life time: -The investor is a Non-integrated petroleum company -Total producible oil in the reserve is estimated to be 2,400,000 barrel -Production rate will be 400,000 barrel of oil per year from year 1 to year 6 -Mineral rights acquisition cost for property would be $1,600,000 at time zero -Intangible drilling cost (IDC) is expected to be $7,000,000 at time zero -Tangible...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT