Assume that an investment of $1,000 produces a future cash flow of $1,000. The discount factor for this future cash flow is 0.80. The NPV is a. $0. b. $110. c. ($200). d. $911. e. none of these.
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Assume that an investment of $1,000 produces a future cash flow of $1,000. The discount factor for this future cash flow is 0.80. The NPV is
a. $0.
b. $110.
c. ($200).
d. $911.
e. none of these.
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Solved in 2 steps
- Assume that an investment of $1,000 produces a future cash flow of $1,000. The discount factor for this future cash flow is 0.80. The NPV is?Consider two assets with the following cash flow streams: Asset A generates $4 at t=1, $3 at t=2, and $10 at t=3. Asset B generates $2 at t=1, $X at t=2, and $10 at t=3. Suppose X=6 and the interest rate r is constant. Suppose r=0.2. Find the value X such that the present value of asset B is 12. Suppose the (one-period) interest rates are variable and given as follows: r01=0.1,r12=0.2, r23=0.3. Calculate the yield to maturity of asset A. (You can use Excel or ascientific calculator to find the solution numerically.)Consider the cash flow below in Figure 1. If this cash flow is equivalent to cash flow given Figure (2) and if the interest is 7%, find A? Select one: a. 756 b. 3000 c. 2500 d. 855 e. 533
- What is the NPV of the following cash flows if the required rate of return is 0.13? Year 0 1 2 3 4 CF -3,241 2,952 1,242 3,310 1,616 Enter the answer with 2 decimals (e.g. 1000.23).Consider two assets with the following cash flow streams: Asset A generates $4 at t=1, $3 at t=2, and $10 at t=3. Asset B generates $2 at t=1, $X at t=2, and $10 at t=3. Suppose X=6 and the interest rate r is constant. For r=0.1, calculate the present value of the two assets. Determine the set of all interest rates {r} such that asset A is more valuable than asset Draw the present value of the assets as a function of the interest rate. Suppose r=0.2. Find the value X such that the present value of asset B is 12. Suppose the (one-period) interest rates are variable and given as follows: r01=0.1,r12=0.2, r23=0.3. Calculate the yield to maturity of asset A. (You can use Excel or ascientific calculator to find the solution numerically.)Consider the calculation of an external rate of return (ERR). The positive cash flows in the cash flow profile are moved forward to t = n using what value of i in the (F|P,i,n–t) factors? a. 0 b. The unknown value of ERR (i′) c. MARR d. IRR.
- Average Rate of Return Method, Net Present Value Method, and Analysis for a service company The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Front-End Loader Year 1 2 3 4 5 Total Year 1 2 3 4 5 6 7 Operating Income 8 9 10 $54,000 54,000 54,000 54,000 54,000 $270,000 0.943 Each project requires an investment of $600,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Present Value of $1 at Compound Interest 6% 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 10% Net Cash Flow 0.909 0.826 0.751 $172,000 172,000 172,000 172,000 172,000 $860,000 12% 0.893 0.797 0.756 0.712 0.658 0.683 0.636 0.572 0.621 0.567 0.497 0.564 0.507 0.513 0.467 0.424 0.386 0.452 0.404 15% 0.361 0.322 0.870 0.432 0.376 0.327 0.284 0.247 Operating Income…Consider the following cash flow diagram. What is the value of X if the internal rate of return is 15%? Solve, a. $246 b. $255 c. $281 d. $290.Consider two assets with the following cash flow streams:Asset A generates $4 at t=1, $3 at t=2, and $10at t=3. Asset B generates $2 at t=1, $X at t=2, and $10at t=3.Suppose X=6 and the interest rate r is constant. (a)For r=0.1, calculate the present value of the two assets. (b)Determine the set of all interest rates {r} such that asset A is more valuable than asset B. (c)Draw the present value of the assets as a function of the interest rate. (d)Suppose r=0.2.Find the value X such that the present value of asset B is 12. (e)Suppose the (one-period) interest rates are variable and given as follows: r01=0.1, r12=0.2, r23=0.3. Calculate the yield to maturity of asset A.
- 7. The cash flows have a present value equal 0. Compute the value of D in the diagram. 300 200 100 3- i = 10% D D D DSolve for the unknown quantity in Parts (a) through (d) that makes the equivalent value of cash outflows equal to the equivalent value of the cash inflow, F. a. If F= $9,500, G = $550, and N=6, then i = ? b. If F = $9,500, G= $550, and i = 3% per period, then N = ? c. If G = $1,100, N = 12, and i =6% per period, then F= ? d. If F = $7,700, N= 6, and i = 6% per period, then G = ? Click the icon to view the accompanying cash-flow diagram. E Click the icon to view the interest and annuity table for discrete compounding when i = 3% per year. Click the icon to view the interest and annuity table for discrete compounding when i= 6% per year. a. The interest rate, i, is 10.5 %. (Round to one decimal place.) b. The number of years, N, is years. (Round to one decimal place.)You are given the following cash flows. What is the present value (t = 0) if the discount rate is 12 percent? 0 1 2 3 4 5 6 (Periods) 0 2,000 2,000 2,000 0 -2,000 -2,000 (cash flows) Select one: a. $4,289 b. $2,804 c. $2,656 d. $4,804 e. $5,302