Question

1. A project has an initial outlay of $1,732. The project will generate annual cash flows of $783 over the 4-year life of the project and terminal cash flows of $258 in the last year of the project. If the required rate of return on the project is 4%, what is the net present value (NPV) of the project? Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.

2.A project has an initial outlay of $11,596. The project will generate cash flows of $7,200 in Years 1-4. What is the profitability index (PI) of this project? Assume an interest rate of 13%.Note: Enter your answer rounded off to two decimal points.

3.ABC, Inc., has a beta of 1.19. The risk-free rate is 2.91% and the market risk premium is 7.89%. What is the required rate of return on ABC's stock?Note: Convert your answer to percentage and round off to two decimal points.

Answer #1

1) Statement showing NPV

Particulars | 0 | 1 | 2 | 3 | 4 | NPV = Sum of PV |

Initial Outlay | -1732 | |||||

Annual cash flow | 783 | 783 | 783 | 783 | ||

Terminal cash flow | 258 | |||||

Total cash flow | -1732 | 783 | 783 | 783 | 1041 | |

PVIF @ 4% | 1.0000 | 0.9615 | 0.9246 | 0.8890 | 0.8548 | |

PV | -1732.00 | 752.88 | 723.93 | 696.08 | 889.85 | 1330.75 |

Thus NPV is $1330.75

2) Statement showing PI Index

Particulars | Annual cash flow | PVIF @ 13% | PV |

1 | 7200 | 0.8850 | 6371.68 |

2 | 7200 | 0.7831 | 5638.66 |

3 | 7200 | 0.6931 | 4989.96 |

4 | 7200 | 0.6133 | 4415.89 |

Total of PV of cash inflow -----------------------------(A) | 21416.19 | ||

Total of PV of cash outflow----------------------------(B) | 11596 | ||

PI Index [A/B] | 1.85 |

3) Required rate as per CAPM = Risk free rate of return + beta ( Market risk premium)

=2.91% + 1.19(7.89%)

=2.91%+9.3891%

=12.30%

A project has an initial outlay of $2,378. The project will
generate annual cash flows of $485 over the 5-year life of the
project and terminal cash flows of $277 in the last year of the
project. If the required rate of return on the project is 20%, what
is the net present value (NPV) of the project?
Note: Enter your answer rounded off to two decimal points. Do
not enter $ or comma in the answer box.

6c1
A project has an initial outlay of $2,154. It has a single cash
flow at the end of year 8 of $4,834. What is the internal rate of
return (IRR) for the project?
Round the answer to two decimal places in percentage
form. (Write the percentage sign in the
"units" box)
6b1
Find the net present value (NPV) for the following series of
future cash flows, assuming the company’s cost of capital is 14.71
percent. The initial outlay is...

Project A would require an initial outlay of $60,000 and is
expected to generate positive cash flows in years one through six
of $18,838; $12,133; $17,123; $13,007; $17,559; and $17,907. Using
a discount rate of 13.2%, what is the NPV of this project? If the
answer is negative, include the negative sign, and show the answer
to the nearest dollar.

Project A would require an initial outlay of $56,000 and is
expected to generate positive cash flows in years one through six
of $16,542; $14,677; $15,035; $19,167; $19,796; and $12,120. Using
a discount rate of 17.1%, what is the NPV of this project? If the
answer is negative, include the negative sign, and show the answer
to the nearest dollar.

A project has an initial outlay of $1,384. It has a single cash
flow at the end of year 8 of $5,106. What is the internal rate of
return (IRR) for the project?
Round the answer to two decimal places in percentage
form.

6B4
A project has an initial outlay of $3,480. It has a single
payoff at the end of year 3 of $9,922. What is the net present
value (NPV) of the project if the company’s cost of capital is
11.97 percent?
6C4
Find the modified internal rate of return (MIRR) for the
following series of future cash flows if the company is able to
reinvest cash flows received from the project at an annual rate of
11.59 percent.The initial outlay...

Calculate the NPV of a project that has an outlay of $200,000
and has annual net cash flows of $50000 per year over 6 years. The
project has a salvage value (disposal value) of 10% of its original
value. The required rate of return for projects of similar risk is
0.1.
Note that the rate of return is quoted as a decimal, e.g. 12%
p.a. is written as .12 in the question above. Your answer must be
accurate to the...

A project has an initial investment of $203,700 and will
generate 5 annual cash flows of $59,800.
Assume a cost of capital of 15.1 %
Calculate the profitability index (PI).
The present value of the cash inflows is
$___.
(Round to the nearest cent.)
The profitability index is ___.
(Round to two decimal places.

The initial outlay of a 3-year project is $240,000. The project
produces zero cash flows in the first two years and $325,000 in the
third year. The discount rate used for this project is 8%. What is
the estimated net present value for this project?

If a project has an initial outlay of $41,000 and cash flows of
$14,000 per year for the next 5 years, what is the IRR of this
project? (Answer to the nearest tenth of a percent, e.g. 12.3).

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