Question

You plan to invest $100,000 in a project that will generate $10,000 at t=2 and then...

You plan to invest $100,000 in a project that will generate $10,000 at t=2 and then subsequent payments forever with each one g% bigger than the previous payment. Assume the discount rate is 12.1%. What is the minimum constant rate g that the cash flows would have to grow in order for the project’s cash flows to have a positive NPV?

a) 2.0%

b)2.9%

c)2.7%

d)3.2%

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
please shows work for the following questions: 2. You also have a second project that will...
please shows work for the following questions: 2. You also have a second project that will also cost 1750 to invest in today, and will generate cash inflows of 300, 500, 590, and 1000 at the end of each of the next four years. If the discount rate is 10%, what is the MIRR and should you accept the project based on the MIRR? 3. You have a third project that will cost 1700 to invest in today, will generate...
A project costs $5,000 at t = 0 and will generate annual cash flows of $750...
A project costs $5,000 at t = 0 and will generate annual cash flows of $750 for 10 years, starting at t = 1. The discount rate is 6%. What is the NPV? What is the IRR? (Write down the equation for the IRR and get the solution using Excel or the calculator.) A project costs $5,000 and will generate annual cash flows of $200 in the first year, $300 in the second year and $400 in the third year....
. (NPV,IRR)A company can invest $1,600,000 in a capital budgeting project that will generate the following...
. (NPV,IRR)A company can invest $1,600,000 in a capital budgeting project that will generate the following forecasted cash flows: Year Cash flow 1 $500,000 2 720,000 3 300,000 4 600,000 The company has a 13% cost of capital. a. Calculate the project’s net present value. b. Calculate the project’s internal rate of return. c. Should the firm accept or reject the project? d. What is the value added to the firm if it accepts this proposed investment?
4. You have a fourth project that will cost 1700 to invest in one year from...
4. You have a fourth project that will cost 1700 to invest in one year from now, will generate a cash inflow of 150 starting in year three and continuing forever. If the discount rate is 8%, what is the NPV and should you accept the project based on the NPV? Please show all of your work
You are considering a project with an initial cash outlay of $100,000 and expected free cash...
You are considering a project with an initial cash outlay of $100,000 and expected free cash flows of $23,000 at the end of each year for 6 years. The required rate of return for this project is 10 percent. a. What is the project’s payback period? b. What is the project’s discounted payback period? c. What is the project’s NPV ? d. What is the project’s PI ? e. What is the project’s IRR ? f. What is the project’s...
5. You are considering a project that costs $500 to invest in today, and will pay...
5. You are considering a project that costs $500 to invest in today, and will pay you $100 next year. The cash inflow will grow at a constant rate of 3% per year after year 1, and you will receive cash inflows for 20 years (total including the first year CF). Your discount rate is 16%. What is the NPV of the project? Also, what would the NPV be if the cash inflows continued forever? Show your work.
4. Suppose you have an opportunity to invest in a project, which is expected to generate...
4. Suppose you have an opportunity to invest in a project, which is expected to generate $5000 in year 1, $7000 in year 2, and $8000 in year 3. The appropriate discount rate for the project is 10%. What is the initial investment of the project when the project's NPV is $4000? a.  $17,609.25 b.  $12,341.09 c.  21,500.00    d.  $20,218.50
Problem Set 4 If you insulate your office for $10,000, you will save $1,000 a year...
Problem Set 4 If you insulate your office for $10,000, you will save $1,000 a year in heating expenses. These savings will last forever. What is the NPV of this investment when the cost of capital is 8%? 10%? What is the IRR? A project costs $5,000 at t = 0 and will generate annual cash flows of $750 for 10 years, starting at t = 1. The discount rate is 6%. What is the NPV? What is the IRR?...
You can purchase an oil pipeline for $3 million today. It is forecasted to generate $2...
You can purchase an oil pipeline for $3 million today. It is forecasted to generate $2 million a year, with the first payment one year from today. The pipeline’s operating costs are negligible, and it is expected to last for a very long time. Unfortunately, the volume of oil shipped through this pipeline is expected to decline, and the cash flows are expected to decline by 4% per year. Further, to comply with environmental regulations, it will need a $1.2...
You have the opportunity to invest your savings, $100,000, in either “Project Slow” or “Project Fast”....
You have the opportunity to invest your savings, $100,000, in either “Project Slow” or “Project Fast”. The cash flows for the two projects are: Year Project Fast Project Slow 1 $35,000 $40,000 2 30,000 35,000 3 30,000 30,000 4 20,000 10,000 If you use the payback method to evaluate your investments, calculate the payback period for each project. Fast: 3.25; Slow: 2.83 Which project would you choose? Answer: (a) Project Fast (b) Project Slow (c)   
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT