Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return onprojects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for theproject are 2.0 and 3.0 years, respectively.Time:0123456Cash flow:-$7,300 $1,160 $2,360 $1,560$1,560$1,360$1,160Use the Pl decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2decimal places.)PI0.94Should it be accepted or rejected?O rejectedO accepted

The Profitability Index (PI) decision rule is a financial metric used in capital budgeting to…

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 2.0 and 3.0 years, respectively. Time: Cash flow: 0 1 2 3 -$7,300 $1,160 $2,360 $1,560 4 $1,560 5 $1,360 6 $1,160 Use the Pl decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) PI 0.94

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 2.0 and 3.0 years, respectively. Time: Cash flow: 0 1 2 3 -$7,300 $1,160 $2,360 $1,560 4 $1,560 5 $1,360 6 $1,160 Use the Pl decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) PI 0.94

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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Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: 0 1 2 3 4 5 6 Cash flow: −$5,000 $1,270 $2,470 $1,670 $1,670 $1,470 $1,270 Use the PI decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) PI: _____.__
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 2.0 and 3.0 years, respectively. Time: 0 1 2 3 4 5 6 Cash flow: −$7,100 $1,000 $2,200 $1,400 $1,400 $1,200 $1,000 Use the IRR decision rule to evaluate this project. (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) Should it be accepted or rejected?multiple choice accepted rejected
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: 0 1 2 3 4 5 6 Cash flow: –$4,800 $1,210 $2,410 $1,610 $1,530 $1,410 $1,210 Use the payback decision rule to evaluate this project.
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3.0 and 3.5 years, respectively. Time: 0 1 2 3 4 5 Cash flow: −$238,000 $66,100 $84,300 $141,300 $122,300 $81,500 Use the NPV decision rule to evaluate this project.
Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Use the IRR decision to evaluate this project; should it be accepted or rejected? Time 0 1 2 3 4 5 6 Cash Flow –$ 5,000 $ 1,200 $ 1,400 $ 1,600 $ 1,600 $ 1,100 $ 2,000
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively. Time: 0 1 2 3 4 5 Cash flow −$231,000 $65,400 $83,600 $140,600 $121,600 $80,800 Use the discounted payback decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Discounted payback _____.__ years
1. Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Use the IRR decision to evaluate this project; should it be accepted or rejected? Time 0 1 2 3 4 5 6 Cash Flow −$ 5,000 $ 1,200 $ 1,400 $ 1,600 $ 1,600 $ 1,100 $ 2,000 2. Bad Pizza Pies, Inc has earnings per share of $1.75 and P/E of 42.56. What is the stock price?
Suppose your firm is considering investing in a project with the accompanying cash flows, that the required rate of return on projects of this risk class is 11 percent, and the maximum allowable payback and discounted payback statistics for your company are 3 and 3.5 years, respectively. Time: 0 1 2 3 4 5 Cash Flow -$175,000 -$65,800 $94,000 $41,000 $122,000 $81,200 Calculate the project's payback period, discounted payback period, net present value, IRR, MIRR, and PI. Evaluate this project, indicating whether each decision rule would call for acceptance or rejection of the project.
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively. Time: 0 1 2 3 4 5 Cash flow: −$356,000 $65,700 $83,900 $140,900 $121,900 $81,100 Use the NPV decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Should it be accepted or rejected?multiple choice accepted rejected
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3 and 3.5 years, respectively. Time: 0 1 2 3 4 5 Cash flow: -$280,000 $ 56,800 $75,000 $123,000 $113,000 $72,200 Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 13 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively. Time: 0 1 2 3 4 5 Cash flow: −$ 225,000 $ 64,800 $ 83,000 $ 140,000 $ 121,000 $ 80,200 Use the IRR decision rule to evaluate this project. Note: Do not round intermediate calculations and round your final answer to 2 decimal places.
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively. Time 0 1 2 3 4 5 6 Cash Flow -1,040 140 460 660 660 260 660 Use the NPV decision rule to evaluate this project; should it be accepted or rejected?

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