1. An investor is pondering on whether to invest in a siomai franchise or in a printing press company. He had his staff analyze the cost benefits that he would get from the two business ventures and they came up with this report. A. The siomai franchise would need Php 800 000 as capital. It has a 60-percent chance of profiting Php 400 000; a 15-percent chance of profiting Php 600 000; and 25- percent chance of losing the capital entirely. B. The paper manufacturing company would need Php 800 000 as capital. It has a 35- percent chance of earning Php 1000 000 and a 65-percent chance of losing the capital entirely. C. Which between the two business ventures should the investor invest his Php 800 000?

1. An investor is pondering on whether to invest in a siomai franchise or in a printing press company. He had his staff analyze the cost benefits that he would get from the two business ventures and they came up with this report. A. The siomai franchise would need Php 800 000 as capital. It has a 60-percent chance of profiting Php 400 000; a 15-percent chance of profiting Php 600 000; and 25- percent chance of losing the capital entirely. B. The paper manufacturing company would need Php 800 000 as capital. It has a 35- percent chance of earning Php 1000 000 and a 65-percent chance of losing the capital entirely. C. Which between the two business ventures should the investor invest his Php 800 000?

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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2. Suppose a business owner is trying to decide whether to invest in a new piece of machinery. The machine costs $160,000, and it is expected to generate revenue of $200,000. a. Solve for the expected rate of return on this machine. a. If the interest rate the business owner has to pay is 20%, will the business owner buy this machine? b. If the interest rate the business owner has to pay is 25%, will the business owner buy this machine? c. If the interest rate the business owner has to pay is 30%, will the business owner buy this machine?
Shaylee Corporation has $2.00 million to invest in new projects. The company's managers have presented a number of possible options that the board must prioritize. Information about the projects follows: Initial investment Present value of future cash flows Required: 1. Is Shaylee able to invest in all of these projects simultaneously? 2-a. Calculate the profitability index for each project. 2-b. What is Shaylee's order of preference based on the profitability index? Complete this question by entering your answers in the tabs below. Req 1 Project A $ 435,000 785,000 Req 2A and 2B Is Shaylee able to invest in all of these projects simultaneously? Is Shaylee able to invest in all of these projects simultaneously? Project C $ 740,000 1,220,000 Project D $ 965,000 1,580,000
Below are four cases that you will have to solve using Excel spreadsheets. 2nd case The COMPETIDORA SA company has the possibility of investing in three different projects . The projections show us the following information on which a decision must be made: PROJECT X Y Initial Z$310,000 It is requested: investment $180,000 $250,000 Year 1 cash flows $50,000 $80,000 $150,000 1. Determine the internal rate of return. 2. Determine the present value. Year 2 cash flows 3. Determine the recovery period. 4. Define which is the most viable project. $70,000 $80,000 $120,000 The discount rate for the project will be 9% and the investors propose a MARR of 22%. Year 3 cash flows $80,000 $80,000 $100,000 Year 4 cash flows $100,000 $80,000
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The company is in search of resources for a new investment of TL 3,000,000. As a financial manager, a) What kind of financing strategy would you suggest for the investment project in question?
Lady Maria is thinking about starting a new business. The company would require $500,000 of assets, and it would be financed entirely with common stock. She will go forward only if she thinks the business can provide a 9.5% return on the invested capital, which means that the company must have an ROE of 9.5%. How much Net Income must be expected to warrant starting the business?
John Doe is thinking about investing in a coffee franchise that will need an initial expenditure of $75,000. He did his research and found that after-tax cash flows on the investment should be about $15,000 per year for the next 7 years. The franchiser stated that John Doe would generate a 20 percent return. His cost of capital is 10 percent. Find the following: the PVB the PVC the NPV the IRR (Hint: Use interpolation, IRR is between 8 percent and 10 percent.)
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Two investors participate in an investment project and, after an analysis economic, the following results were obtained: • Investor A. TMAR: 13.45; NPV: 570,000. • Investor B. TMAR: 13:00; NPV: −2450. Explain the value of the results of investor B based on the recovery of your investment, profits and your minimum acceptable rate of return.
You are considering investing in a start up company. The founder asked you for $200,000 today and you expect to get $1,000,000 in 9 years. Given the riskiness of the investment opportunity, your cost of capital is 20%. What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

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