Question

1.

An investment that costs $6,900 will produce annual cash flows of $3,140 for a period of 4 years. Given a desired rate of return of 8%, the investment will generate a present value index of (Do not round your PV factors and intermediate calculations):

2.197.

1.507.

1.971.

0.664.

2.

Mountain Brook Company is considering two investment
opportunities whose cash flows are provided below:

Year | Investment A | Investment B | ||

0 | $ | (16,750) | $ | (11,100) |

1 | 5,630 | 5,630 | ||

2 | 5,630 | 4,560 | ||

3 | 5,630 | 3,770 | ||

4 | 4,560 | 1,840 |

The company's hurdle rate is 10%. What is the present value index
of Investment A? (Do not round your PV factors and intermediate
calculations.)

1.07

1.00

1.02

None of these answers is correct.

3.

What amount of cash must be invested today in order to have $47,000 at the end of one year assuming the rate of return is 7%? (Do not round your PV factors.)

$43,710.00

$43,925.23

$32,900.00

$41,051.62

4.

Paul Company is considering purchasing a capital investment that is expected to provide annual cash inflows of $12,000 per year for 3 years. Assuming that the required rate of return is 10%, what is the present value of these cash inflows? (Do not round PV factors and intermediate calculations. Round your final answer to the nearest dollar.)

$9,016

$28,822

$29,842

$27,047

Answer #1

**1) solution to
que no 1 : option B (1.507)**

Justification

Cashinflow 3140 per yr * Pvf 8%, 4yrs(3.3121) =10400

Cashoutflow given 10400

Therefore present value index = pv cashinflow

Pv cashoutflow

10400/6900 = 1.507

**Solution to que
no 2 :** **option c) 1.02**

Cash outflow investment A is (16750)

Cashinflow for 4 yrs

5630* pvf 10% fr 3yrs(2.4869) + 4560*pvf yr 4th yr 0.6830 =17115.164

Therfore present value index = pv cash inflow/pv cash outflow

= 17115.164/16750

= 1.02(option c)

**Solution to que
no 3 : option b) 43,925.23**

Future value = present value * (1+r)n

47000= pv*(1+.07) 1yr

Present value= 47000/1.07

Present value= 43925.23(option b)

**Solution to que
no 4** : **option c) 29842$**

cash inflow fr 3yrs 12000 pa * pvf 10% fr 3yrs(2.4869) = 29842$(option c)

An investment that costs $32,000 will produce annual cash flows
of $10,680 for a period of 4 years. Given a desired rate of return
of 8%, what will the investment generate? Use Appendix Table 2.
(Do not round your intermediate calculations. Round your
answer to the nearest whole dollar.)
A positive net present value of $35,374.
A positive net present value of $3,374.
A negative net present value of $3,374.
A negative net present value of $35,374.

An investment project has annual cash inflows of $5,800, $6,900,
$7,700, and $9,000, and a discount rate of 14 percent. Required:
What is the discounted payback period for these cash flows if the
initial cost is $9,000? (Do not round your intermediate
calculations.)
1.24 years
2.49 years
3.48 years
0.74 years
1.74 years

Velma and Keota (V&K) is considering an investment
opportunitiy. The investment requires V&K to spend $10,444.78
to acquire a piece of asset. The asset will have an expected useful
life of three years and no salvage value. This investment will
generate expected cash inflows of $4,200 per year for the next
three years. V&K has established a 9 percent minimum rate of
return for all investments. (PV of $1 and PVA of $1) (Use
appropriate factor(s) from the tables provided.)...

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Investment
A
Investment
B
1
$ 4,000
$7,000
2
5,000
6,000
3
6,000
5,000
4
7,000
4,000
Total
$22,000
$22,000
The discount rate is 12%.
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Compute the present value of the cash inflows for each
investment. Each investment opportunity will require the same
initial investment. (Use Microsoft Excel to calculate
present values. Do not round intermediate
calculations.)
Investment A:
Item
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directed, but do not use rounded numbers in intermediate
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An investment project costs $10,000 and has annual cash flows of
$2,910 for six years.
a.
What is the discounted payback period if the discount rate is 0
percent? (Enter 0 if the project never pays back on a
discounted payback basis. Do not round intermediate calculations
and round your answer to 2 decimal places, e.g.,
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Juliana is considering an investment proposal with the following
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Initial investment-depreciable assets
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Net cash inflows from operations (per year for 10 years)
7,000
Disinvestment
0
For parts b. and c., round answers to three decimal places, if
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a. Determine the payback period.
Answer
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Answer
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Operating Cash Flows without Disinvestment
Juliana is considering an investment proposal with the following
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Initial investment-depreciable assets
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Net cash inflows from operations (per year for 10 years)
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Disinvestment
0
For parts b. and c., round answers to three decimal places, if
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Answer years
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Answer
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Year
Cash Flow
1
$1070
2
$1300
3
$1520
4
$2260
a.
If the discount rate is 8 percent, what is the future value of
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