Question
Can I please get some help? Thank you. 1. Exhibit 8-3 Yale Inc. has two independent investment opportunities, each requiring an initial investment of $260,000.
Can I please get some help? Thank you.
1. Exhibit 8-3 Yale Inc. has two independent investment opportunities, each requiring an initial investment of $260,000. The company's required rate of return is 10 percent. The cash inflows for each investment are provided below.
Investment A | Investment B | |
Year 1 | $140,000 | $20,000 |
Year 2 | 100,000 | 40,000 |
Year 3 | 60,000 | 60,000 |
Year 4 | 40,000 | 80,000 |
Year 5 | 20,000 | 160,000 |
Total inflows | $360,000 | $360,000 |
Factors: Present Value of $1 | Factors: Present Value of an Annuity | ||
(r = 10%) | (r = 10%) | ||
Year 0 | 1.0000 | ||
Year 1 | 0.9091 | Year 1 | 0.9091 |
Year 2 | 0.8264 | Year 2 | 1.7355 |
Year 3 | 0.7513 | Year 3 | 2.4869 |
Year 4 | 0.6830 | Year 4 | 3.1699 |
Year 5 | 0.6209 | Year 5 | 3.7908 |
Refer to Exhibit 8-3. Calculate the net present value for each investment. Should the company invest in both projects?
A) There is not enough information to answer this question.
B) Yes, they should invest in both projects since both have positive net present values.
C) The company should only invest in Investment A, since it is the only project that has a positive net present value.
D) None of the answer choices is correct.
E) No, they should not invest in either project since both have negative net present values.
2. Exhibit 8-1 A project requires an initial investment of $1,500,000 and will return $420,000 each year for six years.
Factors: Present Value of an Annuity | |||
(r = 10%) | |||
Year 1 | 0.9091 | ||
Year 2 | 1.7355 | ||
Year 3 | 2.4869 | ||
Year 4 | 3.1699 | ||
Year 5 | 3.7908 | ||
Year 6 | 4.3553 |
Refer to Exhibit 8-1. If taxes are ignored and the required rate of return is 10%, what is the project's net present value (rounded to the nearest dollar)?
A) $1,262,910
B) None of the answer choices is correct.
C) $329,226
D) $1,020,000
E) $344,409
3. Exhibit 8-2 Liam Company has two independent investment opportunities, each requiring an initial investment of $130,000. The company's required rate of return is 12 percent. The cash inflows for each investment are provided below.
Investment A | Investment B | |
Year 1 | $70,000 | $ 10,000 |
Year 2 | 50,000 | 30,000 |
Year 3 | 30,000 | 50,000 |
Year 4 | 10,000 | 70,000 |
Total inflows | $160,000 | $160,000 |
Factors: Present Value of $1 | Factors: Present Value of an Annuity | ||
(r = 12%) | (r = 12%) | ||
Year 0 | 1.0000 | ||
Year 1 | 0.8929 | Year 1 | 0.8929 |
Year 2 | 0.7972 | Year 2 | 1.6901 |
Year 3 | 0.7118 | Year 3 | 2.4018 |
Year 4 | 0.6355 | Year 4 | 3.0373 |
Refer to Exhibit 8-2. What is the net present value of Investment B (rounded to the nearest dollar) ?
A) $17,080
B) None of the answer choices is correct.
C) $30,000
D) ($15,600)
E) ($17,080)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started