Your firm is considering an investment that will cost $920,000 today.
Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1. $270.000 in years 2, 3 and 4 and 200.000 in years. The discount rate that your firm uses for projects of this type is 10% How much would the NPV change if discount rate increases to 8%?
Homework Answers
The answer will be the 3rd option i.e. $53,373
Calculations:
| Year | Cash flow | 1+r | PVIF | PV |
| 0 | - 920,000 | 1.10 | 1.0000 | - 920,000.00 |
| 1 | 450,000 | 0.9091 | 409,090.91 | |
| 2 | 270,000 | 0.8264 | 223,140.50 | |
| 3 | 270,000 | 0.7513 | 202,855.00 | |
| 4 | 270,000 | 0.6830 | 184,413.63 | |
| 5 | 200,000 | 0.6209 | 124,184.26 | |
| NPV | 223,684.30 | |||
| Year | Cash flow | 1+r | PVIF | PV |
| 0 | - 920,000 | 1.08 | 1.0000 | - 920,000.00 |
| 1 | 450,000 | 0.9259 | 416,666.67 | |
| 2 | 270,000 | 0.8573 | 231,481.48 | |
| 3 | 270,000 | 0.7938 | 214,334.71 | |
| 4 | 270,000 | 0.7350 | 198,458.06 | |
| 5 | 200,000 | 0.6806 | 136,116.64 | |
| NPV | 277,057.55 |
| NPV @ 10% | 223,684 |
| NPV @ 8% | 277,058 |
| Change | 53,373 |
Add Answer to:
Your firm is considering an investment that will cost $920,000 today.
Your firm is considering an investment that will cost $920,000 today. The investment will produce cash...
Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2, 3 and 4, and $200,000 in year 5. The discount rate that your firm uses for projects of this type is 12%. How much would the NPV change if discount rate increases to 8%? ($45,813) ($95,214) $53,373 $102,774
your firm is considering an investment that will cost $920,000 today. the investment will produce cash...
your firm is considering an investment that will cost $920,000 today. the investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. the discount rate that your firm uses for projects of this type is 12%. How much would the NPV change if discount rate increases to 14%?
Your firm is considering an investment that will cost $920,000 today. The investment will produce cash...
Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year one, $270,000 in years two through four, and $200,000 in year five. The discount rate that your firm uses for projects of this type is 9.25%. What is the investment’s net present value (NPV)? $243,211.39 $245,700.45 $175,689.21 $371,707.83
False Question 3 (1 point) A firm is considering an investment project that costs $250,000 today...
False Question 3 (1 point) A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 7.5% to all future cash flows? Your Answer: Answer Question 4 (1 point) The cash flows associated with an investment project are an immediate cost of $2400 and benefits...
A firm is considering an investment project that costs $250,000 today and $250,000 in one year,...
A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 6.9% to all future cash flows? Your Answer: Answer
A firm is considering an investment project that costs $250,000 today and $250,000 in one year,...
A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 7.1% to all future cash flows?
Question 3 (1 point) A firm is considering an investment project that costs $250,000 today and...
Question 3 (1 point) A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 6.3% to all future cash flows? Your Answer: Answer Question 4 (1 point) Rockmont Recreation Inc. is considering a project that has the following cash flow and WACC (weighted average...
22) A firm has an effective (after-tax) cost of debt of 3%, and its weight of...
22) A firm has an effective (after-tax) cost of debt of 3%, and its weight of debt is 40%. Its equity cost of capital is 11%, and its weight of equity is 60%. Calculate the firm’s weighted average cost of capital (WACC). [Enter your answer as a decimal rounded to four decimal places.] 23) A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in...
1. Smith Corporation has a cost capital of 10% and is currently considering an investment of...
1. Smith Corporation has a cost capital of 10% and is currently considering an investment of $825 m. This investment is expected to generate after-tax cash flows of $253 m per year for 7 years and an additional after-tax salvage of $110 m in year 7. What is the investment's profitability index? A. 1.19 B. 1.33 C. 1.56 2. Which of the following statements is least likely to be correct? A. The NPV profile graphed the NPV of a capital...
please answer questions 2-7. 2) You run a construction firm. You have just won a contract...
please answer questions 2-7.
2) You run a construction firm. You have just won a contract to build a government office building. Building it will require an investment of $10 million today and $5 million in one year. The government will pay you $20 million in one year upon the building's completion. Assume the investors' expected rate of return is 10%. a. What is the NPV of this opportunity? b. How can your firm turn this NPV into cash today?...
False Question 3 (1 point) A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 7.5% to all future cash flows? Your Answer: Answer Question 4 (1 point) The cash flows associated with an investment project are an immediate cost of $2400 and benefits...
A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 6.9% to all future cash flows? Your Answer: Answer
Question 3 (1 point) A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 6.3% to all future cash flows? Your Answer: Answer Question 4 (1 point) Rockmont Recreation Inc. is considering a project that has the following cash flow and WACC (weighted average...
please answer questions 2-7.
2) You run a construction firm. You have just won a contract to build a government office building. Building it will require an investment of $10 million today and $5 million in one year. The government will pay you $20 million in one year upon the building's completion. Assume the investors' expected rate of return is 10%. a. What is the NPV of this opportunity? b. How can your firm turn this NPV into cash today?...
Most questions answered within 3 hours.
-
Given the function below, F(w,x,y,z)= x’z+w’z’+w’y
a) draw a logic diagram for an implementation which uses...
asked 58 seconds from now -
This assignment will explore the impact of corporate decisions
on a local versus a global perspective....
asked 23 minutes ago -
Most political philosophers believe we have a duty to obey laws,
even if the laws in...
asked 58 minutes ago -
Which of the following are common negotiation outcome
mistakes?
a. Leave money on the table b....
asked 1 hour ago -
Propose an efficient synthesis of 2-Bromo-5-nitrotoluene from
benzene. Hint: 3 steps. Consider directing effects of substituents....
asked 1 hour ago -
Convert the following quantities:
a) 0.819 atm to torr b) 512 mmHg to bar c) 11.2...
asked 1 hour ago -
C ++ Implement cat command
The purpose of this assignment is to provide practice using the...
asked 1 hour ago -
we
convert sugars into another form of stored potential energy. This
is called?
asked 2 hours ago -
The manufacturers of Oriental Spice Sauce are concerned that the
sodium levels in their product vary...
asked 2 hours ago -
PLEASE DON'T ANSWER IF YOU CAN'T ANSWER ALL OF THE QUESTIONS. I
DESPERATELY NEED HELP
Consider...
asked 3 hours ago -
DO NOT ANSWER IF YOU ARE UNSKILLED IN THIS AREA! TYPE OR WRITE
EACH ANSWER CLEARLY!!...
asked 2 hours ago -
how many moles of sodium are there in 3.41 moles of the
following compounds
NaCl
Na2SO4...
asked 2 hours ago