QuickHelper

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    Phoniex
    Jul-2007 - Jun-2012

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    ChevronTexaco Corporation
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Category > Accounting Posted 30 May 2017 My Price 12.00

What is the Net Present Value of the project,

Question description

 

 

1. a. Yes/No ________: Should your company invest $1,000,000 today in order to return net profit of $1,500,000 five years from now? Discount, using an interest rate of 12.0%. Show your work.


b. Yes/No ________: Should your company invest $1,000,000 today in order to return net profit of $1,500,000 five years from now? Discount, using an interest rate of 6.0%. Show your work.

2. For #1b, what is your decision if there is only an 80% probability of achieving the $1,500,000 five years from now? Show your work.

3. Use the following stream of revenue and expenses for a proposed corporate investment:

Year  Expense  Revenue
0  $1,000,000 
1 
2 
3  $500,000 
4  $700,000
5 
6  $100,000 
7  $1,700,000

a. What is the Net Present Value of the project, using an interest rate of 8.0%? Should you undertake the project?
b. If all the expenses have a 100% probability of being accurate, but the revenue in Year 4 has a 90% probability and the revenue in Year 7 has an 80% probability, what is the "expected" Net Present Value of the project, using an interest rate of 8.0%? Should you undertake the project?

Answers

QuickHelper
(10)
Status NEW Posted 30 May 2017 10:05 AM My Price 12.00

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