Using the Threshold Rate you computed from above, compute the Net Present Value (NPV) for this...

  

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Using the "Threshold Rate" you computed from above, compute the Net Present Value (NPV) for this Investment. You must find the Appropriate Discount Factor for the Threshold Rate and time period. WE ARE USING ANNUAL RATES AND PERIODS, SO A THRESHOLD RATE OF 12% MEANS AN ANNUAL RATE OF 12% AND THE TIME PERIOD IS IN YEARS. [If this were a car loan a rate of 12% would translate into 1% per period because the compounding period is a month and a 5- year loan would be 60 "monthly" periods.] PROPOSAL 1175 GERARD AVENUE Time Period CASH FLOW (end of year) 0 1 2 3 4 5 6 7 8 Time Period (end of year) 0 1 2 3 4 5 6 Using a Annual threshold discount Threshold Rate INSERT NUMBERS HERE IN ALL THE BLANK SPACES 7 PRESENT TIME ($12,000,000) INITIAL INVESTMENT IN THE APARTMENT TOWER (OUT-OF-POCKET = NEGATIVE CASH FLOW) 8 1,000,000 1,400,000 1,800,000 2,100,000 2,300,000 2,400,000 3,000,000 16,000,000 POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS-DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE - OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW COMMENT (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) THE PROJECT IS SOLD (AFTER NET INCOME, RENOVATION COSTS, CLOSING COSTS, & DEBT PAYOFF) rate of INSERT A NUMBER HERE __% for the CASH FLOW ($12,000,000) 1,000,000 1,400,000 1,800,000 2,100,000 2,300,000 2,400,000 3,000,000 DISCOUNT FACTOR (@the Annual Threshold Rate) from PRESENT VALUE TABLE [ALL THIS FACTORS ARE LESS THAT 1.0] 1.000 CALCULATED PRESENT VALUE ($) FOR EACH YEAR $12,000,000 $ $ $ $ $ $ $ 16,000,000 $ SUM Net Present Value (NPV) @ the Threshold Rate => $ INSERT NUMBERS HERE IN ALL THE BLANK SPACES SUMMARY OF CALCULATIONS FOR QUESTION #4: Project 1175 GERARD AVENUE has this standing in our Capital Budgeting system: Initial Investment = Its Time-Line ends with a Sale of the property at the end of the At a Discount Rate of % it has a NPV = Fill-in the appropriate statement below (#1 OR #2): 1. A Positive NPV indicates that, after the. year, the project has earned a rate of return EXCEEDING % (the Threshold Rate) and still has some retained value. It would be ACCEPTABLE. BECAUSE I EMPLOYED A THRESHOLD RATE OF POSITIVE NPV OF $_ COST OF CAPITAL OF OR 2. A Negative NPV indicates that, after the year. %, I AM CERTAIN A FOR THIS PROJECT EXCEEDS THE COMPANY'S _%. . year, the project has earned a rate of % (the Threshold Rate) and has no built-in retained return LESS THAN value. It would be REJECTED. %, I AM CERTAIN A BECAUSE I EMPLOYED A THRESHOLD RATE OF NEGATIVE NPV OF $_ FOR THIS PROJECT DOES NOT EXCEED THE COMPANY'S COST OF CAPITAL OF _%. OTHER NOTES: • One of the foundations of Capitalism holds that companies must earn enough to exceed their Weighted Average Cost of Capital (WACC) so that the stockholders, the bondholders, and the lenders each receive an acceptable rate of return. • Companies employ a Threshold Rate of Return that exceeds their WACC in their NPV analysis to test whether their contemplated capital projects will meet that standard. By employing a Threshold Rate that's higher than their WACC, all projects with a positive NPV qualify for consideration. . Although the NPV analytics simply say that a positive NPV is acceptable, normally, given evenhanded analytical treatment, those with a higher NPV earn the highest ranking. Since the Internal Rate of Return (IRR) approach calculates the embedded rate of interested represented by a series of cash flows, this approach yields a seemingly direct comparison across all projects. As with all these quantitative analyses, a qualitative review develops a convincing and important narrative for the f selection of the competitively proposed capital intensive projects Using the "Threshold Rate" you computed from above, compute the Net Present Value (NPV) for this Investment. You must find the Appropriate Discount Factor for the Threshold Rate and time period. WE ARE USING ANNUAL RATES AND PERIODS, SO A THRESHOLD RATE OF 12% MEANS AN ANNUAL RATE OF 12% AND THE TIME PERIOD IS IN YEARS. [If this were a car loan a rate of 12% would translate into 1% per period because the compounding period is a month and a 5- year loan would be 60 "monthly" periods.] PROPOSAL 1175 GERARD AVENUE Time Period CASH FLOW (end of year) 0 1 2 3 4 5 6 7 8 Time Period (end of year) 0 1 2 3 4 5 6 Using a Annual threshold discount Threshold Rate INSERT NUMBERS HERE IN ALL THE BLANK SPACES 7 PRESENT TIME ($12,000,000) INITIAL INVESTMENT IN THE APARTMENT TOWER (OUT-OF-POCKET = NEGATIVE CASH FLOW) 8 1,000,000 1,400,000 1,800,000 2,100,000 2,300,000 2,400,000 3,000,000 16,000,000 POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS-DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE - OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW COMMENT (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) THE PROJECT IS SOLD (AFTER NET INCOME, RENOVATION COSTS, CLOSING COSTS, & DEBT PAYOFF) rate of INSERT A NUMBER HERE __% for the CASH FLOW ($12,000,000) 1,000,000 1,400,000 1,800,000 2,100,000 2,300,000 2,400,000 3,000,000 DISCOUNT FACTOR (@the Annual Threshold Rate) from PRESENT VALUE TABLE [ALL THIS FACTORS ARE LESS THAT 1.0] 1.000 CALCULATED PRESENT VALUE ($) FOR EACH YEAR $12,000,000 $ $ $ $ $ $ $ 16,000,000 $ SUM Net Present Value (NPV) @ the Threshold Rate => $ INSERT NUMBERS HERE IN ALL THE BLANK SPACES SUMMARY OF CALCULATIONS FOR QUESTION #4: Project 1175 GERARD AVENUE has this standing in our Capital Budgeting system: Initial Investment = Its Time-Line ends with a Sale of the property at the end of the At a Discount Rate of % it has a NPV = Fill-in the appropriate statement below (#1 OR #2): 1. A Positive NPV indicates that, after the. year, the project has earned a rate of return EXCEEDING % (the Threshold Rate) and still has some retained value. It would be ACCEPTABLE. BECAUSE I EMPLOYED A THRESHOLD RATE OF POSITIVE NPV OF $_ COST OF CAPITAL OF OR 2. A Negative NPV indicates that, after the year. %, I AM CERTAIN A FOR THIS PROJECT EXCEEDS THE COMPANY'S _%. . year, the project has earned a rate of % (the Threshold Rate) and has no built-in retained return LESS THAN value. It would be REJECTED. %, I AM CERTAIN A BECAUSE I EMPLOYED A THRESHOLD RATE OF NEGATIVE NPV OF $_ FOR THIS PROJECT DOES NOT EXCEED THE COMPANY'S COST OF CAPITAL OF _%. OTHER NOTES: • One of the foundations of Capitalism holds that companies must earn enough to exceed their Weighted Average Cost of Capital (WACC) so that the stockholders, the bondholders, and the lenders each receive an acceptable rate of return. • Companies employ a Threshold Rate of Return that exceeds their WACC in their NPV analysis to test whether their contemplated capital projects will meet that standard. By employing a Threshold Rate that's higher than their WACC, all projects with a positive NPV qualify for consideration. . Although the NPV analytics simply say that a positive NPV is acceptable, normally, given evenhanded analytical treatment, those with a higher NPV earn the highest ranking. Since the Internal Rate of Return (IRR) approach calculates the embedded rate of interested represented by a series of cash flows, this approach yields a seemingly direct comparison across all projects. As with all these quantitative analyses, a qualitative review develops a convincing and important narrative for the f selection of the competitively proposed capital intensive projects Using the "Threshold Rate" you computed from above, compute the Net Present Value (NPV) for this Investment. You must find the Appropriate Discount Factor for the Threshold Rate and time period. WE ARE USING ANNUAL RATES AND PERIODS, SO A THRESHOLD RATE OF 12% MEANS AN ANNUAL RATE OF 12% AND THE TIME PERIOD IS IN YEARS. [If this were a car loan a rate of 12% would translate into 1% per period because the compounding period is a month and a 5- year loan would be 60 "monthly" periods.] PROPOSAL 1175 GERARD AVENUE Time Period CASH FLOW (end of year) 0 1 2 3 4 5 6 7 8 Time Period (end of year) 0 1 2 3 4 5 6 Using a Annual threshold discount Threshold Rate INSERT NUMBERS HERE IN ALL THE BLANK SPACES 7 PRESENT TIME ($12,000,000) INITIAL INVESTMENT IN THE APARTMENT TOWER (OUT-OF-POCKET = NEGATIVE CASH FLOW) 8 1,000,000 1,400,000 1,800,000 2,100,000 2,300,000 2,400,000 3,000,000 16,000,000 POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS-DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE - OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW COMMENT (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) THE PROJECT IS SOLD (AFTER NET INCOME, RENOVATION COSTS, CLOSING COSTS, & DEBT PAYOFF) rate of INSERT A NUMBER HERE __% for the CASH FLOW ($12,000,000) 1,000,000 1,400,000 1,800,000 2,100,000 2,300,000 2,400,000 3,000,000 DISCOUNT FACTOR (@the Annual Threshold Rate) from PRESENT VALUE TABLE [ALL THIS FACTORS ARE LESS THAT 1.0] 1.000 CALCULATED PRESENT VALUE ($) FOR EACH YEAR $12,000,000 $ $ $ $ $ $ $ 16,000,000 $ SUM Net Present Value (NPV) @ the Threshold Rate => $ INSERT NUMBERS HERE IN ALL THE BLANK SPACES SUMMARY OF CALCULATIONS FOR QUESTION #4: Project 1175 GERARD AVENUE has this standing in our Capital Budgeting system: Initial Investment = Its Time-Line ends with a Sale of the property at the end of the At a Discount Rate of % it has a NPV = Fill-in the appropriate statement below (#1 OR #2): 1. A Positive NPV indicates that, after the. year, the project has earned a rate of return EXCEEDING % (the Threshold Rate) and still has some retained value. It would be ACCEPTABLE. BECAUSE I EMPLOYED A THRESHOLD RATE OF POSITIVE NPV OF $_ COST OF CAPITAL OF OR 2. A Negative NPV indicates that, after the year. %, I AM CERTAIN A FOR THIS PROJECT EXCEEDS THE COMPANY'S _%. . year, the project has earned a rate of % (the Threshold Rate) and has no built-in retained return LESS THAN value. It would be REJECTED. %, I AM CERTAIN A BECAUSE I EMPLOYED A THRESHOLD RATE OF NEGATIVE NPV OF $_ FOR THIS PROJECT DOES NOT EXCEED THE COMPANY'S COST OF CAPITAL OF _%. OTHER NOTES: • One of the foundations of Capitalism holds that companies must earn enough to exceed their Weighted Average Cost of Capital (WACC) so that the stockholders, the bondholders, and the lenders each receive an acceptable rate of return. • Companies employ a Threshold Rate of Return that exceeds their WACC in their NPV analysis to test whether their contemplated capital projects will meet that standard. By employing a Threshold Rate that's higher than their WACC, all projects with a positive NPV qualify for consideration. . Although the NPV analytics simply say that a positive NPV is acceptable, normally, given evenhanded analytical treatment, those with a higher NPV earn the highest ranking. Since the Internal Rate of Return (IRR) approach calculates the embedded rate of interested represented by a series of cash flows, this approach yields a seemingly direct comparison across all projects. As with all these quantitative analyses, a qualitative review develops a convincing and important narrative for the f selection of the competitively proposed capital intensive projects Using the "Threshold Rate" you computed from above, compute the Net Present Value (NPV) for this Investment. You must find the Appropriate Discount Factor for the Threshold Rate and time period. WE ARE USING ANNUAL RATES AND PERIODS, SO A THRESHOLD RATE OF 12% MEANS AN ANNUAL RATE OF 12% AND THE TIME PERIOD IS IN YEARS. [If this were a car loan a rate of 12% would translate into 1% per period because the compounding period is a month and a 5- year loan would be 60 "monthly" periods.] PROPOSAL 1175 GERARD AVENUE Time Period CASH FLOW (end of year) 0 1 2 3 4 5 6 7 8 Time Period (end of year) 0 1 2 3 4 5 6 Using a Annual threshold discount Threshold Rate INSERT NUMBERS HERE IN ALL THE BLANK SPACES 7 PRESENT TIME ($12,000,000) INITIAL INVESTMENT IN THE APARTMENT TOWER (OUT-OF-POCKET = NEGATIVE CASH FLOW) 8 1,000,000 1,400,000 1,800,000 2,100,000 2,300,000 2,400,000 3,000,000 16,000,000 POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS-DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE - OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW COMMENT (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) POSITIVE CASH FLOW (FROM RENTAL REVENUE-OPERATING COSTS - DEBT SERVICE) THE PROJECT IS SOLD (AFTER NET INCOME, RENOVATION COSTS, CLOSING COSTS, & DEBT PAYOFF) rate of INSERT A NUMBER HERE __% for the CASH FLOW ($12,000,000) 1,000,000 1,400,000 1,800,000 2,100,000 2,300,000 2,400,000 3,000,000 DISCOUNT FACTOR (@the Annual Threshold Rate) from PRESENT VALUE TABLE [ALL THIS FACTORS ARE LESS THAT 1.0] 1.000 CALCULATED PRESENT VALUE ($) FOR EACH YEAR $12,000,000 $ $ $ $ $ $ $ 16,000,000 $ SUM Net Present Value (NPV) @ the Threshold Rate => $ INSERT NUMBERS HERE IN ALL THE BLANK SPACES SUMMARY OF CALCULATIONS FOR QUESTION #4: Project 1175 GERARD AVENUE has this standing in our Capital Budgeting system: Initial Investment = Its Time-Line ends with a Sale of the property at the end of the At a Discount Rate of % it has a NPV = Fill-in the appropriate statement below (#1 OR #2): 1. A Positive NPV indicates that, after the. year, the project has earned a rate of return EXCEEDING % (the Threshold Rate) and still has some retained value. It would be ACCEPTABLE. BECAUSE I EMPLOYED A THRESHOLD RATE OF POSITIVE NPV OF $_ COST OF CAPITAL OF OR 2. A Negative NPV indicates that, after the year. %, I AM CERTAIN A FOR THIS PROJECT EXCEEDS THE COMPANY'S _%. . year, the project has earned a rate of % (the Threshold Rate) and has no built-in retained return LESS THAN value. It would be REJECTED. %, I AM CERTAIN A BECAUSE I EMPLOYED A THRESHOLD RATE OF NEGATIVE NPV OF $_ FOR THIS PROJECT DOES NOT EXCEED THE COMPANY'S COST OF CAPITAL OF _%. OTHER NOTES: • One of the foundations of Capitalism holds that companies must earn enough to exceed their Weighted Average Cost of Capital (WACC) so that the stockholders, the bondholders, and the lenders each receive an acceptable rate of return. • Companies employ a Threshold Rate of Return that exceeds their WACC in their NPV analysis to test whether their contemplated capital projects will meet that standard. By employing a Threshold Rate that's higher than their WACC, all projects with a positive NPV qualify for consideration. . Although the NPV analytics simply say that a positive NPV is acceptable, normally, given evenhanded analytical treatment, those with a higher NPV earn the highest ranking. Since the Internal Rate of Return (IRR) approach calculates the embedded rate of interested represented by a series of cash flows, this approach yields a seemingly direct comparison across all projects. As with all these quantitative analyses, a qualitative review develops a convincing and important narrative for the f selection of the competitively proposed capital intensive projects

Answer rating: 100% (QA)

Answer option 1 using Pv factor up to 3 decimal places the Threshold r... View the full answer