Windsor Enterprises is using a discounted cash flow model. Identify which model Windsor might use to estimate the discounted fairvalue under each scenario, and calculate the fair value using the present value tables:Scenario 1: Cash flows are fairly certain$260/year for 5 yearsRisk-adjusted discount rate is 6%Risk-free discount rate is 2%(For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.)Click here to view the factor table PRESENT VALUE OF 1.Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.Scenario 1:Windsor might useFair valueScenario 2:Windsor might useFair value$tA$Scenario 2: Cash flows are uncertain75% probability that cash flows will be $260 in 5 years25% probability that cash flows will be $115 in 5 yearsRisk-adjusted discount rate is 6%Risk-free discount rate is 2%traditional approach1,225.50expected cash flow1,095.21model.model.

The time value of money is a concept related to the change in the value of money as time passes. The…

Vindsor Enterprises is using a discounted cash flow model. Identify which model Windsor might use to estimate the discounted fair alue under each scenario, and calculate the fair value using the present value tables: Scenario 1: Cash flows are fairly certain $260/year for 5 years Risk-adjusted discount rate is 6% Risk-free discount rate is 2% For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25 cenario 1: lick here to view the factor table PRESENT VALUE OF 1. lick here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Windsor might use Fair value cenario 2: Windsor might use Fair value $ Scenario 2: Cash flows are uncertain 75% probability that cash flows will be $260 in 5 years 25% probability that cash flows will be $115 in 5 years Risk-adjusted discount rate is 6% $ Risk-free discount rate is 2% traditional approach ✓ model. expected cash flow 1,225.50 ✓ model. 1,095.21

Vindsor Enterprises is using a discounted cash flow model. Identify which model Windsor might use to estimate the discounted fair alue under each scenario, and calculate the fair value using the present value tables: Scenario 1: Cash flows are fairly certain $260/year for 5 years Risk-adjusted discount rate is 6% Risk-free discount rate is 2% For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25 cenario 1: lick here to view the factor table PRESENT VALUE OF 1. lick here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Windsor might use Fair value cenario 2: Windsor might use Fair value $ Scenario 2: Cash flows are uncertain 75% probability that cash flows will be $260 in 5 years 25% probability that cash flows will be $115 in 5 years Risk-adjusted discount rate is 6% $ Risk-free discount rate is 2% traditional approach ✓ model. expected cash flow 1,225.50 ✓ model. 1,095.21

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Windsor Enterprises is using a discounted cash flow model. Identify which model Windsor might use to estimate the discounted fair value under each scenario, and calculate the fair value using the present value tables: Scenario 1: Cash flows are fairly certain $260/year for 5 years Risk-adjusted discount rate is 6% Risk-free discount rate is 2% Scenario 1: (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.) Windsor might use Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Fair value Scenario 2: Windsor might use Fair value $ Scenario 2: Cash flows are uncertain $ 75% probability that cash flows will be $260 in 5 years 25% probability that cash flows will be $115 in 5 years Risk-adjusted discount rate is 6% 11 eTextbook and Media Risk-free discount rate is 2% Save for Later Last saved 1 second ago. model. model.…
Net Present Value Method, Present Value Index, and Analysis for a service company Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows: Ramp Computer Facilities Network $423,052 Amount to be invested Annual net cash flows: Year 1 Year 2 Year 3 Year 1 2 3 4 5 6 7 8 9 10 6% Present Value of $1 at Compound Interest 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 Maintenance Equipment $677,579 0.424 0.386 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 305,000 284,000 259,000 0.361 0.322 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 220,000 198,000 176,000 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 $188,789 125,000 86,000 63,000
Skysong, Inc. is using a discounted cash flow model. Scenario 1: Cash flows are fairly certain $180/year for 5 years Risk-adjusted discount rate is 6% Risk-free discount rate is 4% Identify which model Skysong might use to estimate the discounted fair value under each scenario, and calculate the fair value. (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answers to 2 decimal places, e.g. 5,275.25.) Click here to view the factor table PRESENT VALUE OF 1 Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Scenario 1. Skysong might use Fair Value Scenario 2: Skysong might use Fair Value $ Scenario 2: Cash flows are uncertain 75% probability that cash flows will be $180 in 5 years 25% probability that cash flows will be $95 in 5 years Risk-adjusted discount rate is 6% Risk-free discount rate is 4% $ traditional approach ✔ model. expected cash flow model.
What is the profitability index for the following set of cash flows if the relevant discount rate is 10 percent? What if the discount rate is 15 percent? If it is 22 percent? Year 0 Year 1 Year 2 Year 3 Discount rate Discount rate Discount rate $ $ DELLI $ $ (15,300) 9,400 7,600 4,300 10% 15% 22% Complete the following analysis. Do not hard code values in your calculations. You must use the built-in Excel function to answer this question. Profitability index at 10 percent
Consider the following cash flows: Year Cash Flow 0 -$ 28,900 1 14,800 2 3 14,100 10,500 a. What is the profitability index for the cash flows if the relevant discount rate is 8 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161 b. What is the profitability index if the discount rate is 13 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161 c. What is the profitability index if the discount rate is 20 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161 Answer is not complete. 0.181 × a. Profitability index b. Profitability index c. Profitability index
Consider the following cash flows: Year Cash Flow 0 -$ 14,800 1 8,400 2 7,600 4,300 a. What is the profitability index for the above set of cash flows if the relevant discount rate is 10 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. b. What is the profitability index if the discount rate is 15 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. What is the profitability index if the discount rate is 22 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. a. Profitability index b. Profitability index c. Profitability index
Consider the following cash flows: Year Cash Flow 0 -$ 29,500 1 14,200 2 3 14,700 11,100 a. What is the profitability index for the cash flows if the relevant discount rate is 10 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. b. What is the profitability index if the discount rate is 15 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. What is the profitability index if the discount rate is 22 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. a. Profitability index b. Profitability index c. Profitability index
n.com Connect (i) Consider the following cash flows: Year Cash Flow 0 -$29,600 1 14,100 2 14,800 3 11,200 a. What is the profitability index for the cash flows if the relevant discount rate is 11 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161 b. What is the profitability index if the discount rate is 16 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. What is the profitability index if the discount rate is 23 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. a. Profitability index b. Profitability index c. Profitability index.
3. follows: Carnegie Corp. projects an annual cash flow for one of its divisions as Year 0 1 2 3 4 5 6 Cash flow (SM) 3 0 -10 2 2 2 2 What is the IRR for this cash flow stream? Try plotting the NPV as a function of the discount rate. Are there any problems with using IRR for this application?
Consider the following cash flows: Year Cash Flow 0 −$28,300 1 15,400 2 13,500 3 9,900 a. What is the profitability index for the cash flows if the relevant discount rate is 9 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What is the profitability index if the discount rate is 14 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) c. What is the profitability index if the discount rate is 25 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)
The cash flows for two alternatives X and Y are shown in the table displayed here. Year: 0 1 2 3 4 5 Alternative X: -$3,000 900 900 900 900 1,300 Alternative Y: -$5,000 1,400 1,400 1,400 1,400 2,100 Write an equation using appropriate compound-interest factors that could be used to solve for the incremental rate of return (ΔIRR) associated with these two alternatives. Do NOT solve this equation for ΔIRR.
Determine the rate of return for the cash flows shown in the diagram. Use trial and error (start with two trials with 5% and 10% interest rates) and then use interpolation (or more trials) to approximate the result. Roh?? S7000 1- ? Year 590 s90 s90 sz00 sz00 sz00 $3000

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