1. A project requires an initial investment (or you may say, ‘cash outflow’) of $225,000 and...
1. A project requires an initial investment (or you may say, ‘cash outflow’) of $225,000 and is expected to generate the following net cash inflows:
Year 1: $120,000
Year 2: $125,000
What is Net Present Value (NPV) of the project if the minimum required rate of return (or, you may say firm’s cost of capital) is 4%?
Group of answer choices
a) 5954.14
b) 6002.23
c) 4420.38
d) 5263.20
2. Let's assume you finance your house through Wells-Fargo Bank. Below, please find the Truth-in-Lending Disclosure (TILD). Calculate Finance Charge, i.e., the dollar amount the credit will cost you at the end of the term.
| Amount Financed | $450,000 |
| Annual Percentage Rate | 4.0% |
| Term | 30 Years |
| Taxes and Insurance per month (Escrow account set up by Wells-Fargo.) | $470 |
Group of answer choices
a) $364,447.4
b) $323,412.8
c) $353,637.2
d) $353,684.4
Homework Answers
1. NPV is the present value of all the cash flows in the future.
Option a) is correct
Please upvote for answering the first question. As per Chegg guidelines, when there are multiple questions, we are encouraged to provide a solution to at least the first question.
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1. A project requires an initial investment (or you may say,
‘cash outflow’) of $225,000 and...
A project requires an initial investment (or you may say, ‘cash outflow’) of $225,000 and is...
A project requires an initial investment (or you may say, ‘cash outflow’) of $225,000 and is expected to generate the following net cash inflows: Year 1: $125,000 Year 2: $120,000 What is Net Present Value (NPV) of the project if the minimum required rate of return (or, you may say firm’s cost of capital) is 5%? 3012.42 2312.23 3201.21 2891.16
A project requires an initial cash outflow of $16000. The investment is expected to produce net...
A project requires an initial cash outflow of $16000. The investment is expected to produce net cash inflows of $2000 each year for eleven years. The internal rate of return on this investment to the nearest tenth of a percent is A. 5.7% B. 6.0% C. 5.9% D. 5.2%
A project has an initial cash outflow of $5,000, at time 0, and the following cash...
A project has an initial cash outflow of $5,000, at time 0, and the following cash flows shown below. This type of project is known as a __________ project. Year Cash Inflows 1 $3,000 2 $3,000 3 $3,000 4 $3,000 5 $(5,000) Group of answer choices mutually-exclusive normal contingent non-normal
3- A project requires an initial investment of $225,000 and is expected to generate the following...
3- A project requires an initial investment of $225,000 and is expected to generate the following net cash inflows: Year 1 $ 95000 Year 2 $ 80000 Year 3 $ 60000 Year 4 S 55000 Required :Compute net present value of the project if the minimum desired rate of return is 12%
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1. The cash flows associated with an investment project are as follows: Initial Outflow -$70,000 Year 1 $20,000 Year 2 $30,000 Year 3 $30,000 Year 4 $30,000 a) What’s the payback period of the project? If a firm’s cutoff payback period is 3 years, should it accept the project? b) If a firm uses discounted payback with a 15% discount rate and a 3-year cutoff period, what’s the discount payback period of the project? Should the firm accept the project?...
For a typical capital investment project, the bulk of the investment-related cash outflow occurs: During the...
For a typical capital investment project, the bulk of the investment-related cash outflow occurs: During the initiation stage of the project During the operation stage of the project Either during the initiation stage or the operation stage During neither the initiation stage nor the operation stage Evenly during all three stages: initiation, operation, and final disposal The time value of money is explicitly considered in which of the following capital budgeting methods? Payback method Net present value (NPV) method Operating...
You are considering a project for which you estimate a large initial cash outflow, followed by...
You are considering a project for which you estimate a large initial cash outflow, followed by several years of cash inflows. During your capital budgeting analysis, you realize that a state environmental law will require you to remove all underground equipment at the end of the project. Assume that the cost of complying with this law makes your Incremental Free Cash Flow number in the final year of the project negative. How might this change your use and/or interpretation of...
You are considering a project with an initial investment of $20 million and annual cash flow...
You are considering a project with an initial investment of $20 million and annual cash flow (before interest and taxes) of $5,000,000. The project’s cash flow is expected to continue forever. The tax rate is 34%, the firm’s unlevered cost of equity is 18% and its after-tax cost of debt is 6.60%. The only side-effect from the use of debt that you are concerned about is related to the tax shield. If the project were to be financed with 100%...
1.) Fuzzy Button Clothing Company is analyzing a project that requires an initial investment of $450,000....
1.) Fuzzy Button Clothing Company is analyzing a project that requires an initial investment of $450,000. The project’s expected cash flows are: Year Cash Flow Year 1 $300,000 Year 2 –125,000 Year 3 400,000 Year 4 500,000 Fuzzy Button Clothing Company’s WACC is 7%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR): a.) 24.54% b.) 18.70% c.) 21.03% d.) 23.37% 2.) If Fuzzy Button Clothing Company’s managers...
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3- A project requires an initial investment of $225,000 and is expected to generate the following net cash inflows: Year 1 $ 95000 Year 2 $ 80000 Year 3 $ 60000 Year 4 S 55000 Required :Compute net present value of the project if the minimum desired rate of return is 12%
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