Capital budgeting techniques: Real Estate
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1. Quick Sale Real Estate Company is planning to invest in a new development. The cost of the project will be $23 million and is expected to generate cash flows of $14,000,000, $11,750,000, and $6,350,000 over the next three years. The company's cost of capital is 20 percent. What is the internal rate of return on this project? (Round to the nearest percent.)
Question 1 options (choose one):
20%
24%
22%
28%
2. Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $814,322, $863,275, $937,250, $1,020,110, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment?
3. An investment of $83 generates after-tax cash flows of $42.00 in Year 1, $70.00 in Year 2, and $129.00 in Year 3. The required rate of return is 20 percent. The net present value is...
4. McKenna Sports Authority is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $827,500, and $1,215,000 over the next three years. What is the payback period for this project?
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Solution Summary
Calculations for IRR, NPV, and Payback period for given short problems.
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