Net present value of project

Assignment Help Financial Management

Reference no: EM132062700

PRESENT VALUE OF AN ANNUITY -

(a) What is the present value of an asset that pays $10,000 per year at the end of the next four years if the appropriate discount rate is 5 percent? What total return would you earn if you bought this asset and it paid its expected cash flows on time each year for the next four years? Prove that you earned the same return that you would have, had you put your money in the bank for four years at 5 percent per year? (PLEASE INCLUDE FORMULAS USED TO SOLVE PROBLEM IN EXCEL).

(b) What is the present value of an asset that pays $15,000 per year at the end of the next five years if the appropriate discount rate is 6 percent? What total return would you earn if you bought this asset and it paid its expected cash flows on time ecah year for the next five years? Prove that you earned the same return that you would have, had you put your money in the bank for five years at 6 percent per year. (PLEASE INCLUDE FORMULAS USED TO SOLVE PROBLEM IN EXCEL).

NET PRESENT VALUE OF A PROJECT -

(c) What is the net present value of a project that has upfront costs of $5 million and pays end of the year cash flows of $1 million in one year, $2 million in two years, and $3 million in three years if the annual discount rate for the project is 3 percent? Show how much money you would have at the end of three years if you bought the project and what you would have instead if you banked your $5 million for three years at 3 percent. (PLEASE INCLUDE FORMULAS USED TO SOLVE PROBLEM IN EXCEL).

(d) What is the net present value of a project that has upfront costs of $6.8 million and pays end of the year cash flows of $1.5 million in one year, $2.5 million in two years, and $3.5 million in three years if the annual discount rate for the project is 4 percent? Show how much money you would have at the end of three years if you bought the project and what you would have instead if you banked your $6.8 million for three years at 4 percent. (PLEASE INCLUDE FORMULAS USED TO SOLVE PROBLEM IN EXCEL)

Reference no: EM132062700

Questions Cloud

Considering investment portfolio containing two stocks : Peter Parker is considering an investment portfolio containing 2 stocks: Wakanda Forever and Wayne Enterprises

Explain the ethical consequences : Explain the ethical consequences if you selected the other forms of organization.

True about off-balance finance : Which of the following is (or are) not true about off-balance finance?

Free cash flow valuation model : Free Cash Flow Valuation Model for Equity Pym Tech has been growing continuously over several years.

Net present value of project : What is the net present value of a project that has upfront costs of $5 million and pays end of the year cash flows of $1 million in one year,

What is the difference between goods and services : What are the three categories of torts? What is the difference between goods and services? What is the perfect tender rule?

What are the free cash flows generated from the project : What are the Free Cash Flows (FCF) generated from the project? What is the Weighted Average Cost of Capital (WACC)?

As more capital is raised, marginal cost of capital rises : As more capital is raised, the marginal cost of capital rises. How can too much capital be damaging to the financial state of the organization?

Difference in npvs between the make and buy options : Calculate the difference in NPVs between the Make and Buy options. Express all costs as positive values in your calculations.

User Account

All Pages