A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would choose (Justify your answer) Year Asset X Asset Y Asset Z 1 $15,000 $ 4,000 $ 6,000 2 $9,000 $10,000 $14,000 3 $5,000 $15,000 $11,000 $29,000 $29,000 $31,000 (a) Asset X. (b) Asset Y. (c) Asset Z. (d) Be indifferent between Asset X and Asset Y

A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would choose (Justify your answer) Year Asset X Asset Y Asset Z 1 $15,000 $ 4,000 $ 6,000 2 $9,000 $10,000 $14,000 3 $5,000 $15,000 $11,000 $29,000 $29,000 $31,000 (a) Asset X. (b) Asset Y. (c) Asset Z. (d) Be indifferent between Asset X and Asset Y

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter4: Managing Your Cash And Savings

Section: Chapter Questions

Problem 8FPE: Determining the right amount of short-term, liquid investments. Ella and Aaron Martin together earn...

See similar textbooks

Similar questions

A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below. Asset Asset 1 Asset 2 Asset 3 Asset 4 Year 1 $21,000 9,000 3,000 6,000 Asset 1 O Asset 2 Based on the wealth maximization goal, the financial manager would choose Asset 3 Year 2 $15,000 15,000 20,000 12,000 Asset 4 Year 3 $6,000 21,000 19,000 12,000
A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below. Asset Asset 1 Asset 2 Asset 3 Asset 4 O Asset 4 O Asset 1 Based on the wealth maximization goal, the financial manager would choose O Asset 3 Year 1 $21,000 6,000 20,000 14,000 O Asset 2 Year 2 $15,000 15,000 14,000 14,000 Year 3 $6,000 21,000 8,000 14,000
A company has two investment possibilities, with the following cash inflows: Investment Year 1 Year 2 Year 3 A $1,000 1,400 1,800 B $1,700 1,700 1,700 If the firm can earn 6 percent in other investments, what is the present value of investments A and B? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest dollar.PV(Investment A): $ __________PV(Investment B): $ __________ If each investment costs $4,000, is the present value of each investment greater than the cost of the investment? The present value of investment A is __less than___ / __greater than__ the cost. The present value of investment B is __less than___ / __greater than__ cost.
A company has two investment possibilities, with the following cash inflows: Investment Year 1 Year 2 Year 3 A $1,500 1,900 2,200 B $1,400 1,400 1,400 If the firm can earn 6 percent in other investments, what is the present value of investments A and B? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest dollar.PV(Investment A): $ PV(Investment B): $ If each investment costs $4,000, is the present value of each investment greater than the cost of the investment?The present value of investment A is -Select-less than greater than Item 3 the cost.The present value of investment B is -Select-less than greater than Item 4 the cost.
Damien offers you a sequence of end-of-year cash flows for an investment as follows: Year 1 2 3 4 4 What is the value of the cash flows if the opportunity cost is 6 percent? (Round to the nearest dollar). Please click on the following link to access a blank worksheet Click to open:: O $8.392 $8.598 Cash Flow $4,000 $3,000 $2,000 $1,000 $8.734 $8.915
You are offered a chance to buy an asset for $4,000 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3. and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset? Select the correct answer. a. 28.08% b. 26.48% с. 28.88% d. 25.68% e. 27.28%.
You must choose between two investments, G and W. The profitability index (PI), net present value (NPV) and internal rate of return (IRR) of the two investments are as follows: Criteria Investment G Investment W NPV –12 000 40 000 PI 0,985 1,053 IRR 20% 24% Which investment(s) should you choose, considering all the above criteria, if the cost of capital is equal to 21% per year
Hi can you help with this question please? An investment has the following cash flow profile. For each value of MARR below, what is the minimum value of X such that the investment is attractive based on an internal rate of return measure of merit? EOY 0 1 2 3 4 Cash Flow $(30,000.00) $ 6,000.00 $ 13,500.00 $X $ 13,500.00 MARR is 12 percent/year
You are offered a chance to buy an asset for $7,250 that is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4. What rate of return would you earn if you bought this asset? a. 5.19% b. 5.46% Ⓒc. 6.05% d. 5.75% e. 4.93%
Assume an investment is priced today at $5,000 and has the following income stream: Year Cash Flow 1 123 2 3 4 $ 1,000 - 2,000 3,000 3,000 Would an investor with a required rate of return of 15 percent be wise to invest at a price of $5,000? Multiple Choice No, because the investment has a net present value of - $1,139.15. No, because the investment has a net present value of - $1,954.91. Yes, because the investment has a net present value of $1,069.66. Yes, because the investment has a net present value of $1,954.91. An investor would be indifferent between purchasing and not purchasing the above investment at the stated price.
MIA Q.1) Your company expects to earn at least 18 percent on its investments. You have to choose between two similar projects (A&B). Below is the cash information for each project. Which of the two projects would you fund if the decision is based only on financial information by using net present value model? if you use payback model which project you will choose? show your calculations? Year 0 1 2 Outflow 225000 190000 0 0 Inflow C.f DE P.V Year Outflow Inflow c. f = R-C C. F D. F P.V 3 30000 0 150000 220000 -225000-190000 150000 10000 - (1+k)" 0 300000 0 5 7 30000 0 30000- 215000 205000 197000 100000 215000 175000 197000 70000 0.847 0.718 3.669 0.516 0.437 0.37 0.314 -225000-160930 107700 115710 110 94076475 72890 219743 7: Project A 4 0 1 2 100000 0 P.V of of WPV = 5PV Project B 3 4 50000 0 50000 150000 250000 250000 200000 250000 -50000 150000 300000 1 0-8470-718 0.609 0.516 -3.000.0042356107700 اسمان M 6 0 wp-v-11975 11976 15 7 50000 30000 200000 180000 120000 150000 180000 90000…
A real estate investment has the following expected cash flows: Year Cash Flows 1 $14,000 2 19,000 3 19,000 4 25,000 The discount rate is 3 percent. What is the investment’s present value? Round your answer to 2 decimal places