【文章內(nèi)容簡(jiǎn)介】 Investment: ($16,000 + $12,000 + $8,000 + $4,000 + 0) / 5 = $8,000 Average accounting return: $4,500 / $8,000 = = % b. 1. AAR does not consider the timing of the cash flows, hence it does not consider the time value of money. 2. AAR uses an arbitrary firm standard as the decision rule. 3. AAR uses accounting data rather than net cash flows. a Average Investment = (8000 + 4000 + 1500 + 0)/4 = Average Net Ine = 2000() = 1500 = AAR = 1500/3375=% a. Solve x by trial and error: $8,000 + $4,000 / (1 + x) + $3000 / (1 + x)2 + $2,000 / (1 + x)3 = 0 x = % b. No, since the IRR (%) is less than the discount rate of 8%. Alternatively, the NPV @ a discount rate of = $. a. Solve r in the equation: $5,000 $2,500 / (1 + r) $2,000 / (1 + r)2 $1,000 / (1 + r)3 $1,000 / (1 + r)4 = 0 By trial and error, IRR = r = % b. Since this problem is the case of financing, accept the project if the IRR is less than the required rate of return. IRR = % 10% Reject the offer. c. IRR = % 20% Accept the offer. d. When r = 10%: NPV = $5,000 $2,500 / $2,000 / $1,000 / $1,000 / = $ When r = 20%: NPV = $5,000 $2,500 / $2,000 / $1,000 / $1,000 / = $ Yes, they are consistent with the choices of the IRR rule since the signs of the cash flows change only once. PI = $40,000 / $160,000 = Since the PI exceeds one accept the project.Chapter 7: Net Present Value and Capital Budgeting Since there is uncertainty surrounding the bonus payments, which McRae might receive, you must use the expected value of McRae’s bonuses in the putation of the PV of his contract. McRae’s salary plus the expected value of his bonuses in years one through three is $250,000 + 180。 $75,000 + 180。 $0 = $295,000. Thus the total PV of his threeyear contract is PV = $400,000 + $295,000 [(1 1 / ) / ] + {$125,000 / } [(1 1 / / ] = $1,594, EPS = $800,000 / 200,000 = $4 NPVGO = ($400,000 + $1,000,000) / 200,000 = $3 Price = EPS / r + NPVGO = $4 / + $3 =$ Year 0Year 1Year 2Year 3Year 4Year 51.Annual Salary Savings$120,000$120,000$120,000$120,000$120,0002.Depreciation 100,000160,00096,00057,60057,6003.Taxable Ine20,00040,00024,00062,40062,4004.Taxes6,80013,6008,16021,21621,2165.Operating Cash Flow (line 14)113,200133,600111,84098,78498,7846.D Net working capital$100,000100,0007.Investment$500,00075,792*8.Total Cash Flow$400,000$113,200$133,600$111,840$98,784$74,576 *75,792 = $100,000 ($100,000 $28,800) NPV = $400,000+ $113,200 / + $133,600 / + $111,840 / + $98,784 / + $74,576 / = $7, Real interest rate = ( / ) 1 = % NPVA = $40,000+ $20,000 / + $15,000 / + $15,000 / = $1, NPVB = $50,000+ $10,000 / + $20,000 / + $40,000 / = $ Choose project A. PV = $120,000 / { ()} = $705, the tax rate is zero.t = 0t = 1t = 2t = 3t = 4t = 5t = 6...$12,000$6,000$6,000$6,000 $4,000$12,000$6,000$6,000... The present value of one cycle is: PV = $12,000 + $6,000 + $4,000 / = $12,000 + $6,000 () + $4,000 / = $31,The cycle is four years long, so use a four year annuity factor to pute the equivalent annual cost (EAC). EAC = $31, / = $31, / = $9,006 The present value of such a stream in perpetuity is $9,006 / = $150,100 To evaluate the word processors, pute their equivalent annual costs (EAC). Bang PV(costs) = (10 180。 $8,000) + (10 180。 $2,000) = $80,000 + $20,000 () = $138,274 EAC = $138,274 / = $47,456 IOU PV(costs) = (11 180。 $5,000) + (11 180。 $2,500) (11 180。 $500) / = $55,000 + $27,500 () $5,500 / = $115,132 EAC = $115,132 / = $49,592 BYO should purchase the Bang word processors.Chapter 8: Strategy and Analysis in Using Net Present Value The accounting breakeven = (120,000 + 20,000) / (1,500 1,100) = 350 units a. The accounting breakeven = 340,000 / ( ) = 265,625 abalones b. [($ 180。 300,000) (340,000 + 180。 300,000)] () = $28,600 This is the after tax profit.Chapter 9: Capital Market Theory: An Overview a. Capital gains = $38 $37 = $1 per share b. Total dollar returns = Dividends + Capital Gains = $1,000 + ($1*500) = $1,500 On a per share basis, this calculation is $2 + $1 = $3 per share c. On a per share basis, $3/$37 = = % On a total dollar basis, $1,500/(500*$37) = = % d. No, you do not need to sell the shares to include the capital gains in the putation of the returns. The capital gain is included whether or not you realize the gain. Since you could realize the gain if you choose, you should include it. The expected holding period return is: There appears to be a lack of clarity about the meaning of holding period returns. The method used in the answer to this question is the one used in Section . However, the correspondence is not exact, because in this question, unlike Section , there are cash flows within the holding period. The answer above ignores the dividend paid in the first year. Although the answer above technically conforms to the eqn at the bottom of Fig. , the presence of intermediate cash flows that aren’t accounted for renders this measure questionable, at best. There is no similar example in the body of the text, and I have never seen holding period returns calculated in this way before. Although not discussed in this book, there are two generally accepted methods of puting holding period returns in the presence of intermediate cash flows. First, the time weighted return calculates averages (geometric or arithmetic) of returns between cash flows. Unfortunately, that method can’t be used here, becau