just finished the business plan of his start-up company. According to the projections he carried-out, the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
just finished the business plan of his start-up company. According to the projections he carried-out, the initial investment is 1,500,000 SAR (assume that we are in the beginning of 2023), which will be financed by his family (500,000 SAR) and with a bank loan the rest (1,000,000 SAR). The bank loan interest rate is 6% and his family is happy with receiving the same rate of return on the investment. The following table includes Edward's projections for the cash-flow to be generated in the 5 years, after which Edward plans to sell the company for a market value of 2,000,000 SAR. Cash-flows Year 2023 100,000 2024 300,000 2025 400,000 2026 500,000 2027 600,000 Terminal Value (2027) 2,000,000 a) What is the project's expected Net Present Value? (Hint: use the NPV excel function and, after, consider the initial investment) Answer: b) What is the project's expected Internal Rate of Return? (Hint: use the IRR excel function) Answer: just finished the business plan of his start-up company. According to the projections he carried-out, the initial investment is 1,500,000 SAR (assume that we are in the beginning of 2023), which will be financed by his family (500,000 SAR) and with a bank loan the rest (1,000,000 SAR). The bank loan interest rate is 6% and his family is happy with receiving the same rate of return on the investment. The following table includes Edward's projections for the cash-flow to be generated in the 5 years, after which Edward plans to sell the company for a market value of 2,000,000 SAR. Cash-flows Year 2023 100,000 2024 300,000 2025 400,000 2026 500,000 2027 600,000 Terminal Value (2027) 2,000,000 a) What is the project's expected Net Present Value? (Hint: use the NPV excel function and, after, consider the initial investment) Answer: b) What is the project's expected Internal Rate of Return? (Hint: use the IRR excel function) Answer:
Expert Answer:
Answer rating: 100% (QA)
a To calculate the Net Present Value NPV we need to discount each cash flow back to the present ... View the full answer
Related Book For
Entrepreneurial Finance
ISBN: 978-1305968356
6th edition
Authors: J. Chris Leach, Ronald W. Melicher
Posted Date:
Students also viewed these finance questions
-
4. Account A has an annual percentage yield of 2.5% compound interest. Account B has an interest rate of 0.2% per month compound interest. If the initial investment is 3000, how much more money has...
-
Ratio 2019 2018 2017 2019- Industry Average Inventory Turnover 62.65 42.42 32.25 53.25 DSO 113 98 94 130.25 Debt Ratio 43% 46% 47% 47% Profit Margin 0.082 0.07 0.06 0.075 Total Asset Turnover 0.54...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Suppose that the following equations describe an economy: C = 170 + 0.60YD M s = 735; P = 1 T = 200 I = 100 - 4i Md = 0.75Y - 6i G = 350 a) what is the equation for equilibrium in the goods market?...
-
Chlorine has an average atomic mass of 35.45 amu. The two naturally occurring isotopes of chlorine are chlorine-35 and chlorine-37. Why does this indicate that most chlorine atoms contain 18 neutrons?
-
Consider the following two situations-cases A and B- independently. Data refer to operations for April 2017. For each situation, assume standard costing. Also assume the use of a flexible budget for...
-
Venus Company uses a perpetual inventory system. It entered into the following calendar-year 2005 purchases and sales transactions: Required 1. Compute cost of goods available for sale and the number...
-
You are a partner in a local accounting firm that does financial planning and prepares tax returns, payroll, and financial reports for medium-size companies. Your monthly financial statements show...
-
accompanying table summarizes data from a survey of 3,400 parents with school-aged children. In this survey, parents were asked if they were compietery sausried with the education their child...
-
If an amino acid is found at the exact same location in the alignment of two homologous proteins, that amino acid is said to be "absolutely conserved." An amino acid type can also be conserved at a...
-
Question 36 (1 point) You want to be 95% confident in estimating the average response time for emergency calls within an accuracy of 0.25 minutes. The known population standard deviation for response...
-
What is testimonial evidence? Identify the types of testimonial evidence the auditor obtains during an audit. For each type listed, identify the factors that affect its perceived reliability and...
-
How might the BMW Oracle team have used collaboration systems to improve the design and performance of the America's Cup boat USA? Which system features would be the most important for these tasks?
-
Identify some of the people, organizational, and technology issues that UPS had to address when creating its successful information systems.
-
Which pitfall of group problem solving and decision making is most common?
-
Suppose that electrons had three possible values of the spin quantum number. What would be the electron configuration of an element with Z = 10?
-
The Resistance In A Non-Ideal Inductor Model Is A Characteristic Which Is Due To The Resistance Of The Wire Used To Make The Coil Of The Inductor. In What Frequency Range Will This Added Non-Ideal...
-
Imagine you are the HR manager at a company, and a female employee came to you upset because she felt a male coworker was creating a hostile work environment by repeatedly asking her out on dates...
-
The first quarter of 2008 had not yet ended and Steve Savage already knew the company would surpass the projected $22 million in revenues for the year. He and the management team had doubled sales...
-
The Castillo Products Company was started in 2014. The company manufactures components for personal digital assistant (PDA) products and for other handheld electronic products. A difficult operating...
-
LeAnn Sands has reason to believe that 2017 will be a replication of 2016 (see Problem 8) except that cost of goods sold is expected to be 5 percent of the estimated $450,000 in revenues. Other...
-
EuroVirtuals EPS and Euro Appreciation/ Depreciation. Since its introduction in 2003, the euro has been fluctuating against major global currencies. a. What is the impact of 15% appreciation of all...
-
EuroVirtuals EPS Sensitivity to Exchange Rates (B). Assume a major weather crisis hits Switzerland, reducing its agricultural and food industries and subsequently leading to a macroeconomic...
-
EuroVirtuals Global Taxation and Effective Tax Rate. All MNEs attempt to minimize their global tax liabilities. Return to the original set of baseline assumptions and answer the following questions...
Study smarter with the SolutionInn App