A firm evaluates a project with the following cash flows. The firm has a 2 year payback period criteria and a required return of 11 percent. Year Cash flow (OMR) 0 -24,000 1 17,000 2 12,000 3 9,000 4 -8,000 5 11,000 11. What is the net present value for the project? 12. What is the payback period for the project? 13. What is the discounted payback period for the project? 14. What is the profitability index for the project? 15. Given your analysis, should the firm accept or reject the project? 16. You recently purchased a stock that is expected to earn 33 percent in a booming economy, 13 percent in a normal economy, and lose 40 percent in a recessionary economy. There is a 15 percent probability of a boom and a 60 percent chance of a normal economy. What is your expected rate of return on this stock?
Use the following information to answer questions 11-15:
A firm evaluates a project with the following cash flows. The firm has a 2 year payback period
criteria and a required return of 11 percent.
Year Cash flow
(OMR)
0 -24,000
1 17,000
2 12,000
3 9,000
4 -8,000
5 11,000
11. What is the
12. What is the payback period for the project?
13. What is the discounted payback period for the project?
14. What is the profitability index for the project?
15. Given your analysis, should the firm accept or reject the project?
16. You recently purchased a stock that is expected to earn 33 percent in a booming economy, 13
percent in a normal economy, and lose 40 percent in a recessionary economy. There is a 15
percent probability of a boom and a 60 percent chance of a normal economy. What is your
expected
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