RiverRocks, Inc., is considering a project with the following projected free cash flows: Year 1 2 Cash Flow - $50.3 $10.3 $19.3 $19.5 $14.1 (in millions) The firm believes that, given the risk of this project, the WACC method is the appropriate approach to valuing the project. RiverRocks' WACC is 11.8%. Should it take on this project? Why or why not? The timeline for the project's cash flows is: (Select the best choice below.) O A. Cash Flows (millions) - $50.3 $10.3 $19.3 $19.5 $14.1 + Year 1 3 4 O B. Cash Flows (millions) - $50.3 - $10.3 - $19.3 -$19.5 - $14.1 Year 1 2 3 4 OC. Cash Flows (millions) $50.3 - $10.3 - $19.3 - $19.5 - $14.1 Year 1 4 O D. Cash Flows (millions) $50.3 $10.3 $19.3 $19.5 $14.1 + Year 1 2 3 4 The net present value of the project is S million, (Round to three decimal places.)

RiverRocks, Inc., is considering a project with the following projected free cash flows: Year 1 2 Cash Flow - $50.3 $10.3 $19.3 $19.5 $14.1 (in millions) The firm believes that, given the risk of this project, the WACC method is the appropriate approach to valuing the project. RiverRocks' WACC is 11.8%. Should it take on this project? Why or why not? The timeline for the project's cash flows is: (Select the best choice below.) O A. Cash Flows (millions) - $50.3 $10.3 $19.3 $19.5 $14.1 + Year 1 3 4 O B. Cash Flows (millions) - $50.3 - $10.3 - $19.3 -$19.5 - $14.1 Year 1 2 3 4 OC. Cash Flows (millions) $50.3 - $10.3 - $19.3 - $19.5 - $14.1 Year 1 4 O D. Cash Flows (millions) $50.3 $10.3 $19.3 $19.5 $14.1 + Year 1 2 3 4 The net present value of the project is S million, (Round to three decimal places.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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RiverRocks, Inc., is considering a project with the following projected free cash flows: Year 0 Cash Flow - $49.6 (in millions) 1 $10.5 2 $19.4 3 $19.4 4 $14.6 The firm believes that, given the risk of this project, the WACC method is the appropriate approach to valuing the project. RiverRocks' WACC is 12.9%. Should it take on this project? Why or why not?
RiverRocks, Inc., is considering a project with the following projected free cash flows: Year 0 Cash Flow - $50.8 (in millions) O A. Cash Flows (millions) - $50.8 The timeline for the project's cash flows is: (Select the best choice below.) Year B. Cash Flows (millions) The firm believes that, given the risk of this project, the WACC method is the appropriate approach to valuing the project. RiverRocks' WACC is 12.8%. Should it take on this project? Why or why not? Year O C. Cash Flows (millions) Year D. Cash Flows (millions) Year 0 - $50.8 0 $50.8 0 $50.8 0 - $10.8 + 1 $10.8 1 - $10.8 1 1 $10.8 $10.8 1 - $20.7 2 $20.7 2 - $20.7 2 2 $20.7 $20.7 2 - $19.5 3 $19.5 + 3 - $19.5 3 $19.5 3 $19.5 3 - $15.4 4 $15.4 4 - $15.4 4 $15.4 4 $15.4 4
RiverRocks, Inc., is considering a project with the following projected free cash flows: Year Cash Flow (in millions) O A. Cash Flows (millions) $50.3 Year O B. Cash Flows (millions) $50.3 0 - $50.3 The timeline for the project's cash flows is: (Select the best choice below.) Year OC. Cash Flows (millions) - $50.3 Year The firm believes that, given the risk of this project, the WACC method is the appropriate approach to valuing the project. RiverRocks' WACC is 12.1%. Should it take on this project? Why or why not? 0 0 Year D. Cash Flows (millions) - $50.3 0 - $10.5 $10.5 1 -$10.5 1 $10.5 $10.5 1 - $19.1 2 $19.1 + 2 - $19.1 + 2 2 $19.1 $19.1 2 - $20.6 3 $20.6 3 - $20.6 + 3 3 $20.6 $20.6 + 3 - $15.7 $15.7 - $15.7 4 4 $15.7 $15.7
Howell Petroleum inc, is trying to evaluate a generation project with the following cash flows: Year 0: -52,000,000 Year 1: 74,000,000 Year2: -12,000,000 If the project rate of return is 12% on its investments, should it accept this project? Why? Compute the IRR for this project. How many IRR are there? Using the IRR decision rule, should the company accept the project? What’s going on here?
Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What is the project's MIRR? Note that a project's projected MIRR can be less than the WACC (and even negative), in which case it will be rejected. WACC: 10.00% Year Cash flows 10.32% 11.35% 12.50% O 13.78% O 14.20% 0 -$2,000 1 $800 2 $800 3 $1,000
Cornell Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV?Note that a project's projected NPV can be negative, in which case it will be rejected. WACC: 10.00%Year 0 1 2 3Cash flows −$1,050 $450 $460 $470
Datta Computer Systems is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected. Year Cash flows -$1,425 $450 $470 $490 -0.40% -0.48% -0.50% O-0.56% 0 1 2 3 O -0.52%
Grey Fox Aviation Company is analyzing a project that requires an initial investment of $450,000. The project’s expected cash flows are: Year Cash Flow Year 1 $300,000 Year 2 –175,000 Year 3 475,000 Year 4 450,000 Grey Fox Aviation Company’s WACC is 10%, and the project has the same risk as the firm’s average project. Calculate this project’s modified internal rate of return (MIRR): 26.73% 27.89% 20.92% 23.24% If Grey Fox Aviation Company’s managers select projects based on the MIRR criterion, they should this independent project. Which of the following statements best describes the difference between the IRR method and the MIRR method? The IRR method uses only cash inflows to calculate the IRR. The MIRR method uses both cash inflows and cash outflows to calculate the MIRR. The IRR method assumes that cash flows are reinvested at a rate of return equal to the IRR. The MIRR method assumes that cash flows…
Border Mining, Inc., is trying to evaluate a project with the following cash flows: Year Cash Flow 0 −$ 39,300,000 1 63,300,000 2 − 12,300,000 a-1. What is the NPV for the project if the company requires a return of 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. Should the firm accept this project?
Warnock Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Notethat a project's projected NPV can be negative, in which case it will be rejected. WACC: 10.00%Year 0 1 2 3Cash flows −$950 $500 $400 $300
Bluekettle Inc. is considering a project that has the following cash. What is the project's NPV(net present value) if you use a required rate of 14% ? If the NPV is negative, put the minus sign in front of your answer, such as -200.56. Note that a project's projected NPV can be negative, in which case it will be rejected. Year 0 1 2 3 Cash flows - $6,500 $1,600 $3,700 $7,500
Maxwell Feed & Seed is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected. Year 0 1 2 3 4 5 Cash flows -$6,750 $2,000 $2,025 $2,050 $2,075 $2,100

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