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1. A project has an initial cost of $27,400 and a market value of $32,600. What...
A project has an initial cost of $31,800 and a market value of $29,600. What is...
A project has an initial cost of $31,800 and a market value of $29,600. What is the difference between these two values called? Net present value Accounting return Payback value Profitability index Discounted payback
Please solve it by hand so that I can understand the steps. 6. A project has...
Please solve it by hand so that I can understand the steps. 6. A project has the following total (or net) after-tax cash flows. ____________________________________________________ Year Total (or net) after-tax cash flow ____________________________________________________ 1 $1,000,000 2 1,500,000 3 2,000,000 4 2,500,000 _______________________________________________________ The required rate of return on the project is 15 percent. The initial investment (or initial cost or initial outlay) of the project is $4,000,000. a) Find the (regular) payback period of...
You are considering a project that will require an initial outlay of $400,000. This project has...
You are considering a project that will require an initial outlay of $400,000. This project has an expected life of four years and will generate after-tax cash flows to the company as a whole of $120,000 at the end of each year over its five-year life. Thus, the free cash flows associated with this project look like this: Year Free Cash Flow 0 -150,000 1 120,000 2 120,000 3 120,000 4 120,000 Given a required rate of return of 20%...
You are considering a project that will require an initial outlay of $200,000. This project has...
You are considering a project that will require an initial outlay of $200,000. This project has an expected life of four years and will generate after-tax cash flows to the company as a whole of $60,000 at the end of each year over its five-year life. Thus, the free cash flows associated with this project look like this: Year Free Cash Flow 0 -150,000 1 60,000 2 60,000 3 60,000 4 60,000 Given a required rate of return of 10%...
The length of time required for an investment to generate cash flows sufficient to recoup the...
The length of time required for an investment to generate cash flows sufficient to recoup the initial cost of the investment is called the a. Net present value b. Profitability index c. Payback period d. Internal rate of return e. Discounted cash period
1. A company is considering a project, Project A. The established time horizon to recover the...
1. A company is considering a project, Project A. The established time horizon to recover the initial capital outlay is 5 years. The projected cash flows for Project A are shown below. Project A Year I Cash Flow (S) (220,000) 60,000 2 70,000 85,000 70,000 50,000 The cost of capital for these projects is 9 percent. Required: Use the information presented to evaluate for Project A: a) Payback period b) Discounted payback period c) Net present value d) Profitability index...
1. The time value of money refers to the fact that money has an opportunity cost,...
1. The time value of money refers to the fact that money has an opportunity cost, i.e., its reinvestment rate. a. True b. False 2. If the payback period is used as the criterion for assigning priorities to investment projects, the highest priority will be assigned to projects with the shortest payback period. a. True b. False 3. The _______________ is the discount rate that makes the present value of the benefits generated by a project equal to the investment....
1. We can get multiple IRRS when we draw an NPV profile for a project when:...
1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requires a large investment. c. The project cash flows are uneven and change in sign. d. The project has a balloon payment. e. The opportunity cost of capital is high. 2. The length of time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of...
1. Which of the following methods of project analysis are most commonly used by CFO's? internal...
1. Which of the following methods of project analysis are most commonly used by CFO's? internal rate of return and net present value discounted payback and net present value net present value and payback internal rate of return and payback 2. Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 341,000 –$ 51,000 1 54,000 24,900 2 74,000 22,900 3 74,000 20,400 4 449,000 15,500 Whichever project you choose, if any,...
5. Which of the following is/are correct? A. If the salvage value is the same as...
5. Which of the following is/are correct? A. If the salvage value is the same as the book value of the asset, then there is a tax effect. B. Book value = initial cost - accumulated depreciation C. After-tax salvage = salvage - Tax Rate x (salvage - book value) D. Both B and C 6. ________ is the most important alternative to Net Present Value. A. IRR B. Payback Method C. Average Accounting Return D. Discounted Payback 7. The...
1. A company is considering a project, Project A. The established time horizon to recover the initial capital outlay is 5 years. The projected cash flows for Project A are shown below. Project A Year I Cash Flow (S) (220,000) 60,000 2 70,000 85,000 70,000 50,000 The cost of capital for these projects is 9 percent. Required: Use the information presented to evaluate for Project A: a) Payback period b) Discounted payback period c) Net present value d) Profitability index...
1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requires a large investment. c. The project cash flows are uneven and change in sign. d. The project has a balloon payment. e. The opportunity cost of capital is high. 2. The length of time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of...
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