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- Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?1) An engineer is establishing his own small company. He investment of P500,000 which he will recover in 15 years. It is estimated that his annual revenue will be P900,000 per year and his annual cost is P750 000. If the he expects to earn at least 20% of his capital, should he invest? Note: Use Rate of Return Method and Annual Worth Method.
- An investor pays P1,100,000 for a mine which will yield a net income of P200,000 at the end of each year for 10 years and then will become useless. He accumulates a replacement fund to recover his capital by annual investments at 4.5%. At what rate (%) does he receive interest on his investment at the end of each year?You receive £5,000 in three years' time and the cost of capital for the project is 7%. What is that cash-flow worth in today's money? O A. £0.8163 O B. £0.7629 O C. £5,350 O D. £4,081.49An investment company is considering one of two possible business ventures. Project 1 gives a return of $250 000 in four years’ time, whereas Project2 gives a return of $350 000 in eight years’ time. Which project should thecompany invest in when the interest rate is 7% compounded annually?
- If you invest $5,123 in a long-term venture, you will receive $1,110 per year forever. Assuming your interest rate is 10% per year, what is the capitalized worth of your investment? Choose the most closest answer below. (a) $4,327 (b) $5,977 (c) $5,819 (d) $6,103An investor pays ₱1,100,000 for a mine which will yield a net income of ₱200,000 at the end of each year for 10 years and then will become useless. He accumulates a replacement fund at 4.5%. At what rate (%) does he receive interest on his investment at the end of each year? ANSWER WITH COMPLETE SOLUTIONIt is estimated that a timber tract will yield an annual profit of P100,000 for 6 years, at the end of which time the timber will be exhausted. The land itself will then have an anticipated value of P40,000. If a prospective purchaser desires a return of 9% on his investment and can deposit money in sinking fund at 4%, what is the maximum price he should pay for the tract?
- An oil well which could produce a net income of P15,083,207 per year for 25 years is being purchased by group of businessmen. If the return on investment is targeted to be 19.534% and a sinking fund at 17.351% interest is to be established to recover the investment. a. How much capital must be invested, assuming the oil well will become useless after 25 years? b. How much capital must be invested, if after 25 years you can receive P1,835,016 from the oil well? c. What percentage decrease in the rate of return on investment to increase the capital by 6%? Assume no salvage value.Consider a project in which you have to invest $15,000 today and you will receive $24847 in one year. What is the internal rate of return (IRR) of this project? The IRR is % (Keep 2 decimal places). Answer:A friend of yours can invest in a multiyear project. The cost is$14,000. Annual cash flows are estimated to be $5,000 per yearfor six years but could vary between $2,500 and $7,000. Yourfriend estimates that the cost of capital (interest rate) is 11 %,but it could be as low as 9.5% and as high as 12 %. The basis ofthe decision to invest will be whether the project has a positive net present value. Construct a tornado diagram for this problem.Based on the tornado diagram, advise your friend regardingeither (1) whether to invest or (2) what to do next in the analysis.
