Question

A firm is considering a 4-year project with an initial investment of $400,000. During the first year of operation, the project will bring an incremental cash flow of $100,000. The firm expects that the cash flow will grow at 15% annually. The project will be terminated after the fourth year of operation. If the required rate of return for this project is 17%, should the firm accept the project based on NPV criterion?

No, because the NPV is -$66,790

Yes, because the NPV is $35,370

Yes, because the NPV is $99,340.

Indifferent, because the NPV is $0.

No, because the NPV is -$125,680

Answer #1

A firm is considering a 4-year project with an initial
investment of $400,000. During the first year of operation, the
project will bring an incremental cash flow of $100,000. The firm
expects that the cash flow will grow at 15% annually. The project
will be terminated after the fourth year of operation. If the
required rate of return for this project is 17%, should the firm
accept the project based on NPV criterion?
Group of answer choices
Indifferent, because the...

A firm is considering three different projects for investment.
Project A will require an initial investment of $100,000 today and
will generate annual cash flows of $25,000 for a five-year period.
Project B will require an initial investment of $150,000 today will
generate annual cash flows of $35,000 for a five-year period.
Project C will require an initial investment of $275,000 today, and
will generate a cash flow of $75,000 in the first year. Cash flows
will grow by 3%...

A firm is considering three different projects for
investment. Project A will require an initial investment
of $100,000 today and will generate annual cash flows of $25,000
for a five-year period. Project B will require an
initial investment of $150,000 today will generate annual cash
flows of $35,000 for a five-year period. Project C will
require an initial investment of $275,000 today, and will generate
a cash flow of $75,000 in the first year. Cash flows
will grow by 3% per year for project...

A firm is considering an investment opportunity today. The
initial cash flow (year 0) will be an investment of $50 million.
The project is expected to generate a project cash flow of $5
million for year 1, and the firm expects project cash flows to
increase by 4% per year over the life of the project. The project
will run for 20 years, and the firm has a cost of capital of 11%.
What is the NPV of this proposed...

A firm is considering an investment opportunity today. The
initial cash flow (year 0) will be an investment of $50 million.
The project is expected to generate a project cash flow of $6
million for year 1, and the firm expects project cash flows to
increase by 4% per year over the life of the project. The project
will run for 20 years, and the firm has a cost of capital of 12%.
What is the NPV of this proposed...

Explorer, Inc. is considering a new 4-year project that requires
an initial fixed asset (equipment) investment of $200,000. The
fixed asset is three-year MACRS property for tax purposes. In four
years, the equipment will be worth about half of what we paid for
it. The project is estimated to generate $500,000 in annual sales,
with costs of $400,000. The firm has to invest $100,000 in net
working capital at the start. After that, net working capital
requirements will be 25...

"Explorer, Inc. is considering a new 4-year project that
requires an initial fixed asset (equipment) investment of $200,000.
The fixed asset is three-year MACRS property for tax purposes. In
four years, the equipment will be worth about half of what we paid
for it. The project is estimated to generate $500,000 in annual
sales, with costs of $400,000. The firm has to invest $100,000 in
net working capital at the start. After that, net working capital
requirements will be 25...

Explorer, Inc. is considering a new 4-year project that requires
an initial fixed asset (equipment) investment of $200,000. The
fixed asset is three-year MACRS property for tax purposes. In four
years, the equipment will be worth about half of what we paid for
it. The project is estimated to generate $500,000 in annual sales,
with costs of $400,000. The firm has to invest $100,000 in net
working capital at the start. After that, net working capital
requirements will be 25...

A firm is considering investing in a project that requires an
initial investment of $200,000 and is expected to produce cash
inflows of $60,000, $80,000, and $100,000 in first, second, and
third years. There will be no residual value.
The firm applies a discount rate of 10%.
Discount factors for Year 1, 2 and 3 are 0.909, 0.826, and 0.751
respectively.
Required:
i) Calculate the NPV of the project.
ii) Explain the meaning of NPV and its advantages as an...

A firm is considering investing in a project that requires an
initial investment of $200,000 and is expected to produce cash
inflows of $60,000, $80,000, and $100,000 in first, second, and
third years. There will be no residual value.
The firm applies a discount rate of 10%.
Discount factors for Year 1, 2 and 3 are 0.909, 0.826, and 0.751
respectively.
Required:
i) Calculate the NPV of the project.
ii) Explain the meaning of NPV and its advantages as an...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 14 minutes ago

asked 20 minutes ago

asked 35 minutes ago

asked 35 minutes ago

asked 36 minutes ago

asked 42 minutes ago

asked 44 minutes ago

asked 44 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago