If no other specification is made, assume the annuity is an ordinary annuity (with deposits/payments made at the end of each compounding period). The U.S. Bureau of Reclamation is considering building a dam and reservoir to hold water. The construction of the dam and reservoir will take four years. The winning bid for the construction has been awarded and contracted and will cost nine billion dollars spread equally over the four years of construction, with payments made every quarter. What is the present value (PV) of the dam and reservoir if the interest rate is 5%, compounded quarterly? (Round your answer to the nearest dollar.) $_

If no other specification is made, assume the annuity is an ordinary annuity (with deposits/payments made at the end of each compounding period). The U.S. Bureau of Reclamation is considering building a dam and reservoir to hold water. The construction of the dam and reservoir will take four years. The winning bid for the construction has been awarded and contracted and will cost nine billion dollars spread equally over the four years of construction, with payments made every quarter. What is the present value (PV) of the dam and reservoir if the interest rate is 5%, compounded quarterly? (Round your answer to the nearest dollar.) $_

Name: 5 If no other specification is made, assume the annuity is an ordinary
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Description: 5 If no other specification is made, assume the annuity is an ordinary annuity (withdeposits/payments made at the end of each compounding period).The U.S. Bureau of Reclamation is considering building a dam and reservoir to hold water. Theconstructio

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 11MC: In an unrelated analysis, you have the opportunity to choose between the following two mutually...

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The Sampson Company is considering a project that requires an initial outlay of $75,000 and produces cash inflows of $20,806 each year for five years. Sampson's cost of capital is 10%. Calculate the project's IRR recognizing the fact that the cash inflows are an annuity. Is the project acceptable? Did your calculation in this part result in any number(s) that were also calculated in part a? What is it about this problem that creates this similarity? Will this always happen in such cases? What is the project's NPV? Is it acceptable according to NPV rules?
NUBD must choose one of two mutually exclusive projects. Project A has an up-front cost (t = 0) of P120,000, and it is expected to produce cash inflows of P80,000 per year at the end of each of the next two years. Two years from now, the project can be repeated at a higher up-front cost of P125,000, but the cash inflows will remain the same. Project B has an up-front cost of P100,000, and it is expected to produce cash inflows of P41,000 per year at the end of each of the next four years. Project B cannot be repeated. Both projects have a cost of capital of 10 percent. NUBD wants to select the project that provides the most value over the next four years. What is the net present value (NPV) of the project that creates the most value for NUBD? (Use replacement chain method)
What will be the equivalent uniform annual amount that will be deposited in a bank for 15 years that will be replaced the capitalized cost of a project with the following cost; The initial cost is P2,000,000 and an additional cost of P500,000 at the end of every 5 years. The annual operating costs are P100,000 at the end of every year for the first 6 years and P160, 000 thereafter. In addition, there is expected to be a major repair work cost of P300, 000 every 13 yrs. Assume i =15%.
Maud'Dib Intergalactic has a new project available on Arrakis. The cost of the project is $36,000 and it will provide cash flows of $19,800, $25, 300, and $24, 200 over each of the next three years, respectively. Any cash earned in Arrakis is "blocked" and must be reinvested in the country for one year at an interest of 3.5 percent. The project has a required return of 8.5 percent. What is the project's NPV? Multiple Choice $19, 982.00 $22, 686.44 $31, 694.85 $28,575.27 $34, 576.20
In an unrelated analysis, you have the opportunity to choose between the following two mutually exclusive projects, Project T (which lasts for 2 years) and Project F (which lasts for 4 years): The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have a 10% cost of capital. (1) What is each projects initial NPV without replication? (2) What is each projects equivalent annual annuity? (3) Apply the replacement chain approach to determine the projects extended NPVs. Which project should be chosen? (4) Assume that the cost to replicate Project T in 2 years will increase to 105,000 due to inflation. How should the analysis be handled now, and which project should be chosen?
Maud'Dib Intergalactic has a new project available on Arrakis. The cost of the project is $38,000 and it will provide cash flows of $21,400, $27,300, and $27,000 over each of the next three years, respectively. Any cash earned in Arrakis is "blocked" and must be reinvested in the country for one year at an interest of 3.1 percent. The project has a required return of 8.9 percent. What is the project's NPV?
An investment project provides cash inflows of $735 per year for eight years. a. What is the project payback period if the initial cost is $1,950? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the project payback period if the initial cost is $3,800? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the project payback period if the initial cost is $5,900? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
4. Acompany has to replace a present facility after 15 years at an outlay of ETB. 5,00,000. It plans to deposit an equal amount at the end of every year for the next 15 years at an interest rate of 18% compounded annually. Find the equivalent amount that must be deposited at the end of every year for the next 15 years. 5. Before evaluating the economic merits of a proposed investment, the XYZ Corporation insists that its engineers develop a cash-flow diagram of the proposal. An investment of
Project 1 requires an original investment of $48,500. The project will yield cash flows of $13,000 per year for seven years. Project 2 has a computed net present value of $12,700 over a five-year life. Project 1 could be sold at the end of five years for a price of $54,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402…
Project 1 requires an original investment of $54,000. The project will yield cash flows of $8,000 per year for nine years. Project 2 has a calculated net present value of $17,300 over a seven-year life. Project 1 could be sold at the end of seven years for a price of $37,000. Use the Present Value of $1 at Compound Interest and the Present Value of an Annuity of $1 at Compound Interest tables shown below. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402…
An investment project provides cash inflows of $1,100 per year for eight years. a. What is the project payback period if the initial cost is $3,750? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the project payback period if the initial cost is $4,800? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. What is the project payback period if the initial cost is $9,800? (Enter 0 if the project never pays back. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Ace Inc. is evaluating two mutually exclusive projects—Project A and Project B. The initial investment for each project is $50,000. Project A will generate cash inflows equal to $15,625 at the end of each of the next five years; Project B will generate only one cash inflow in the amount of $99,500 at the end of the fifth year (i.e., no cash flows are generated in the first four years). The required rate of return of Ace Inc. is 10 percent. Which project should Ace Inc. purchase? Group of answer choices Project A should be purchased because it has a higher net present value (NPV) than Project B. Project A should be purchased because it will produce cash every year for five years. Project A should be purchased because it has a positive net present value (NPV). Neither project should be purchased, because neither has a positive net present value (NPV).