A firm is considering investing in a project that will cost $700,000. Then the project will provide positive cash flows of $200,000 per year for four years. The firm has a WACC of 12.5%. What is the Payback Period of this Project?
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- Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?Tropical Sweets is considering a project that will cost $70 million and will generate expected cash flows of $30 million per year for 3 years. The cost of capital for this type of project is 10%, and the risk-free rate is 6%. After discussions with the marketing department, you learn that there is a 30% chance of high demand with associated future cash flows of $45 million per year. There is also a 40% chance of average demand with cash flows of $30 million per year as well as a 30% chance of low demand with cash flows of only $15 million per year. What is the expected NPV?Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
- Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?A firm is considering an investment opportunity. The firm’s cost of capital for this project is 14%. The project will require an initial investment of $10 million and it will generate cash flows $868,000 in the first year and $1,000,000 in the second year. After that, the cash flow will grow at 3% annually forever. What is the NPV of this project?
- A company is considering investing in a new project that requires an initial investment of $1,000,000. The projected cash flows from the project are as follows: Year 1: $300,000 Year 2: $400,000 Year 3: $500,000 Year 4: $600,000 The company's required rate of return for similar projects is 12%. What is the Net Present Value (NPV) of the project? What is the Internal Rate of Return (IRR) of the project? YOU MUST SHOW CALCULATIONS TO BACK UP YOUR SELECTION. -$100,000// 12% $250,000 // 10% $250,000 // 14% $350,000 // 14% $50,000 // %14JFINEX Corporation is considering a new project that will cost 110,000. The project is expected to generate cash flows over the next four years in the amounts of +200,000 in year one, -30,000 in year two, -25,000 in year three, and +50,000 in year four. The required rate of return is 12%. What is the profitability index of this project?You are evaluating a project that will cost $508,000, but is expected to produce cash flows of $126,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 11.3% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is years. (Round to two decimal places.)
- You are evaluating a project that will cost $502,000, but is expected to produce cash flows of $127,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 10.7% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company? a. What is the payback period of this project? The payback period is years. (Round to two decimal places.) b. Should you take the project if you want to increase the value of the company? (Select from the drop-down menus.) If you want to increase the value of the company you take the project since the NPV is will not willA project is expected to generate the following cash flows: $1 million in one year, $3.7 million in two years, $4 million in three years and $4,3 million in four years. The cash flow is then expected to remain constant (54 3 million per year) in perpetuity. How much are you willing to invest in the project today if you want the project to have an internal Rate of Return (IRR) of 15% ?You are evaluating a project that will cost $543,000, but is expected to produce cash flows of $127,000 per year for 10 years, with the first cash flow in one year. Your cost of capital is 10.9% and your company's preferred payback period is three years or less. a. What is the payback period of this project? b. Should you take the project if you want to increase the value of the company?
