Sun Life Investment Fund lends $500,000 for each new idea. The Fund's history is that it selects high-risk projects or ideas that hit 20% of the time. What rate of return must each successful project pay the Fund for it to break even?
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Sun Life Investment Fund lends $500,000 for each new idea. The Fund's history is that it selects high-risk projects or ideas that hit 20% of the time. What
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- Suppose that a $200M VC fund has a management fee of 2.5 percent per year for the first five years, with a reduction of 0.25 percent (25 basis points) in each year thereafter. All fees are paid on committed capital, and the fund has a 10-year life. What are the lifetime fees and investment capital for this fund?Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment or $28.000 and is expected to generate the following cash flows: If the discount rate is 5% compute the NPV of each project and make a recommendation of the project to be chosen.
- Billabong Tech uses the internal rate of return (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project T-Shirt requires an initial investment of $24,333 and generates cash inflows of $8,500 per year for 7 years. Project Board Shorts requires an initial investment of $42,333 and produces cash inflows of $14,000 per year for 8 years. The IRR of project T-Shirt is %. (Round to two decimal places.)A firm is reviewing a project that has an initial cost of $85,000. The project will produce cash inflows, starting with year 1, of $10,000, $15,500, $23,600, $30,100, and finally in year five, $38,700. What is the profitability index if the discount rate is 14 percent?Acceleron is planning future expansion with a new facility in Indianapolis. The company will make the move when its real estate sinking fund has a total value of $1.2 million. If the fund currently has $400,000 and the company adds $50,000 per year, how many years will it take for the account to reach the desired value? The fund earns interest at a rate of 10% per year.
- Billabong Tech uses the internal rate of return (IRR) to select projects. Calculate the IRR for each of the following projects and recommend the best project based on this measure. Project T-Shirt requires an initial investment of $ 15,333 and generates cash inflows of $ 7,000 per year for 4 years. Project Board Shorts requires an initial investment of $ 28,500 and produces cash inflows of $ 13,500 per year for 5 years.Yamaha Growth Fund has an expense ratio of 1.83%. If you invest $55,000 in this fund, what is the dollar amount of fees that you would pay this year, and is this a low, average or high expense ratio?Winston Clinic is evaluating a project that costs $52, 125 and has expected net cash inflows of $12,000 per year for eight years. The first inflow occurs one year after the cost outflow, and the project has a cost of capital of 12 percent. What is the project's payback? What is the project's NPV? Its IRR? Its MIRR? Is the project financially acceptable? Explain your answer.
- Suppose that we make contributions to a fund of $125 today and $750 in twoyears for a return of $1000 in one year. First write the Net Present Value as a function of the discount factor ν. Secondly, use the NPV to calculate the yield rate of this investment (select the larger value for i. Finally, explain whether or not this is a good investment for us. Please show all workHasty Drums, Inc. is considering two independent projects and is using the internal rate of return technique to make a choice. Project X requires an initial investment of $80,000; it will have cash inflows at the end of each of the next five years of $25,000. Project Z requires an initial investment of $120,000; it has cash inflows of $40,000 at the end of each of the next four years. What are the IRRs of each project? (Project X? and project Z?)Hasty Drums, Inc. is considering two independent projects and is using the internal rate of return technique to make a choice. Project X requires an initial investment of $80,000; it will have cash inflows at the end of each of the next five years of $25,000. Project Z requires an initial investment of $120,000; it has cash inflows of $40,000 at the end of each of the next four years. What are the IRRs of each project? Ace Corporation is considering expanding its operations. If it expands, its current accounts are expected to change. Cash will increase by $20,000, accounts receivable by $40,000, and inventories by $60,000. At the same time accounts payable are going to increase by $50,000, accruals by $10,000, and long-term debt by $100,000. What will be the change in net working capital? Zebra Corporation plans to sell an existing asset for $21,000. The asset cost $10,000 and it was being depreciated under MACRS using a five-year recovery period. Until now, it has been…