Question

An investment project has the following cash flows: CF0 = -1,200,000; C01 – C05 = 300,000...

An investment project has the following cash flows: CF0 = -1,200,000; C01 – C05 = 300,000 each. If the required rate of return is 12%, the project should be accepted, rejected, cannot decide.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Net Present Value of project is - 118,567.14 and hence project should be rejected.

Calculation of Net Present value:
Year Cash Flow Discount factor Present Value
a b c=1.12^-a d=b*c
0 $(12,00,000.00) 1.0000 $(12,00,000.00)
1 $3,00,000.00 0.8929 $2,67,857.14
2 $3,00,000.00 0.7972 $2,39,158.16
3 $3,00,000.00 0.7118 $2,13,534.07
4 $3,00,000.00 0.6355 $1,90,655.42
5 $3,00,000.00 0.5674 $1,70,228.06
Net Present Value $(1,18,567.14)
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
An investment project has the following cash flows: Initial investment of $1,000,000 and cash flows starting...
An investment project has the following cash flows: Initial investment of $1,000,000 and cash flows starting in the first year through year 4 of $300,000 each. If the required rate of return is 12% What is the present value for each cash flow? What is the NPV and what decision should be made using the NPV?
In capital budgeting, which of the measures should be larger than one and accept it? NPV...
In capital budgeting, which of the measures should be larger than one and accept it? NPV IRR MIRR PI 2) An investment project has the following cash flows: CF0 = -1,200,000; C01 – C05 = 300,000 each If the required rate of return is 12%, please calculate PI pf the project. a. 0.51   b. 0.88 c. 0.90   d. 0.99   e. 1.05   f. 1.07   g. 1.11  
An investment project has the following cash flows: initial cost = $1,000,000; cash inflows = $200,000...
An investment project has the following cash flows: initial cost = $1,000,000; cash inflows = $200,000 per year for eight years. If the required rate of return is 12%: i) Compute the project’s NPV. What decision should be made using NPV? ii) Compute the project’s IRR. How would the IRR decision rule be used for this project, and what decision would be reached?
Projects A and B are mutually exclusive. Project A has cash flows of −$10,000, $5,100, $3,400,...
Projects A and B are mutually exclusive. Project A has cash flows of −$10,000, $5,100, $3,400, and $4,500 for Years 0 to 3, respectively. Project B has cash flows of −$10,000, $4,500, $3,400, and $5,100 for Years 0 to 3, respectively.          B-1 what is the IRR of project A?          B-2 What is the IRR of project B?          B-3 Based on the IRR rule, which project should be accepted and why?          B-4 At what required rate of...
QEP Resources has a project with initial investment requiring $-55,000 and the following cash flows will...
QEP Resources has a project with initial investment requiring $-55,000 and the following cash flows will be generated because of the project: $13,750; $55,000; $64,000; and $64,000 respectively at the end of each year for the next four years. If the required rate of return is 0.15, find the future value of these cash flows.
Assume an investment has cash flows of -$42,100, $22,650, $18,950, and $12,100 for Years 0 to...
Assume an investment has cash flows of -$42,100, $22,650, $18,950, and $12,100 for Years 0 to 3, respectively. What is the NPV if the required return is 15.6 percent? Should the project be accepted or rejected? Multiple Choice -$493.30; reject -$1,084.22; reject $1,084.22; accept $1,210.80; accept $493.30; accept
Suppose your firm is considering investing in a project with the cash flows shown below, that...
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 13 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3 and 3.5 years, respectively. Time: 0 1 2 3 4 5 Cash flow: −$300,000 $52,800 $71,000 $115,000 $109,000 $68,200 Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations and round...
Projects A and B are mutually exclusive and have the following cash flows: Year Project A...
Projects A and B are mutually exclusive and have the following cash flows: Year Project A Project B 0 -$82,000 -$82,000 1 34,000 0 2 34,000 0 3 34,000 108,000 1. What is the crossover rate? 2. Do we have a conflict in ranking between the NPV and IRR methods if the required rate of return is 8%? 3. Which project should be accepted if the required rate of return is 5%? 4. Which project should be accepted if the...
Your company has a project available with the following cash flows: Year Cash Flow 0: −$80,600...
Your company has a project available with the following cash flows: Year Cash Flow 0: −$80,600 1: 21,750 2: 25,500 3: 31,300 4: 26,250 5: 20,300 If the required return is 15 percent, should the project be accepted based on the IRR?
A company has the following investment opportunity: Time Cash Flow 0 -$1,200,000 1 600,000 2 400,000...
A company has the following investment opportunity: Time Cash Flow 0 -$1,200,000 1 600,000 2 400,000 3 250,000 4 150,000 5 150,000 The weighted average cost of capital for this company is 12%. a. What is the net present value of this project? Based on NPV analysis, should the company accept the project? Why or why not? b. What is the internal rate of return? Based on IRR analysis, should the company accept the project? Why or why not?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT