An investment requires an initial disbursement of € 2,500,000 and the duration of the project is 3 years, in the first of which it generates a cash flow of € 1,500,000, in the second € 3,700,000 and the third € 4,100,000. a) Calculate the Net Present Value of the investment, knowing that inflation is 3% cumulative annually and that the required profitability in the absence of inflation is 8%. b) Calculate the actual internal rate of return of the previous investment.

An investment requires an initial disbursement of € 2,500,000 and the duration of the project is 3 years, in the first of which it generates a cash flow of € 1,500,000, in the second € 3,700,000 and the third € 4,100,000. a) Calculate the Net Present Value of the investment, knowing that inflation is 3% cumulative annually and that the required profitability in the absence of inflation is 8%. b) Calculate the actual internal rate of return of the previous investment.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 16P

See similar textbooks

Similar questions

Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The discount factor for year 1 is 0.89 and for year 2 is 0.80. The NPV is a. 0 b. 6,800 c. 1,400 d. (4,000)
An investment requires an initial disbursement of €2,500,000 and the duration of the project is 3 years, in the first of which it generates a cash flow of €1,500,000, in the second € 3,700,000 and the third €4,100,000. Calculate the Net Present Value of the investment, knowing that inflation is 3% cumulative annually and that the required profitability in the absence of inflation is 8%. Calculate the actual internal rate of return of the previous investment.
an investment is expected to produce the cash flows of €800, €500 and €600 at the end of the new years.Find the present value of investment if the required return of rate is 10%
An investment, which is worth $54,000.00 and has an expected return of 11.80 percent, is expected to pay fixed annual cash flows for a given amount of time. The first annual cash flow is expected in 1 year from today and the last annual cash flow is expected in 6 years from today. What is the present value of the annual cash flow that is expected in 3 years from today? O $10,516.47 (plus or minus 10 dollars) O $13,059.88 (plus or minus 10 dollars) O $9,345.74 (plus or minus 10 dollars) O $11,681.46 (plus or minus 10 dollars) O none of the answers are within 10 dollars of the correct answer +
An investment will have a future value equal to Php180,250 after 6 years. It has a nominal rate of 10.5% that is compounded quarterly. What is the present value of the investment? O Php85,702.10 O Php93,450.70 O Php96,783.02 O Php67,347.03
An investment project has expected cash flows as shown below. The required rate of return for the project is 11.8%. What is the project's net present value (NPV)? Assume that the cash flows after year 0 occur at the end of each year. Year 0 cash flow= -91,000 Year 1 cash flow=21,000 Year 2 cash flow= 40,000 Year 3 cash flow= 43,000 Year 4 cash flow= 55,000 Year 5 cash flow= 19,000
An investment, which is worth $57,023.00 and has an expected return of 17.00 percent, is expected to pay fixed annual cash flows forever with the next annual cash flow expected in 1 year. What is the present value of the annual cash flow that is expected in 3 years from today? O $9,693.91 (plus or minus 3 dollars) O $35,603.48 (plus or minus 3 dollars) O $6,052.59 (plus or minus 3 dollars) O $8,285.39 (plus or minus 3 dollars) O none of the answers are within 3 dollars of the correct answer
You are looking to invest in a project. The expected return of 5% is used as the discount rate. The initial investment is P6 million and the project will last for five years, with the following estimated cash flows per year: P500,000; P600,000.00; P700,000.00; P300,000.00; P200,000.00 and P100,000.00 respectively.. A. Compute for Net Present Value B. How many percent is the Internal rate of Return?
Find the nominal rate of an investment with duration of 4 and a half years compounded once a year. The present value of the investment is Php50,010 while the future value is Php60,072.82. 4% O 5% 6% O 3%
A certain investment will require an immediate cash outflow of $4m. At the end of each ofthe next 4 years, the investment will generate cash inflows of $1.25m. a) Assuming that these cash flows are in nominal terms and that the nominal discount rate is 10.25%, calculate the projects NPV. b) Now assume that the expectedd rate of inflation is 5% per year. Recalculate the projects cash flow in real terms, discount htem at the real interest rate, and verify that you obtain the same NPV. Hint: find the reall cash flows by adjusting the values of cash flows by the 5% inflation rate. Then using the equation of real rate and nominal rate, determine the real rate of return.
A present investment of tk 500,000 is expected to yield receipts of tk70, 000 a year for 15 years. What is the appropriate rate of return that will be obtained on this investment? (Hint: apply linear interpolation if necessary).
The expected profits from a $165,000 investment are $55,000 in Year 1, $80,000 in Year 2, and $120,000 in Year 3. What is the investment’s payback period?