Assignment:
Need to show work.
a. Consider the project with the following expected cash flows:
Year Cash flow 0 -$400,000 1 $100,000 2 $120,000 3 $850,000
Now draw (for yourself) a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis?
[ Look at the graph you draw and write a short paragraph stating what the graph 'shows"]..
b. Consider a project with the expected cash flows:
Year Cash flow
0 -$815,000
1 $141,000
2 $320,000
3 $440,000
If the discount rate is 4%, what is this project's net present value?
If the discount rate is 10%, what is this project's net present value?
If the discount rate is 18%, what is this project's net present value?
Now draw (for yourself) a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis?
[ Observe the graph and write a short paragraph stating what the graph 'shows]
c. A project requiring a $4.2 million investment has a profitability index of 0.94. What is its net present value? (Remember: Profitability Index is defined as Present Value of the proceeds divided by the initial investment)
Subject | Business |
Due By (Pacific Time) | 09/15/13 |
Tutor | Rating |
---|---|
pallavi Chat Now! |
out of 1971 reviews More.. |
amosmm Chat Now! |
out of 766 reviews More.. |
PhyzKyd Chat Now! |
out of 1164 reviews More.. |
rajdeep77 Chat Now! |
out of 721 reviews More.. |
sctys Chat Now! |
out of 1600 reviews More.. |
sharadgreen Chat Now! |
out of 770 reviews More.. |
topnotcher Chat Now! |
out of 766 reviews More.. |
XXXIAO Chat Now! |
out of 680 reviews More.. |