C0 = -200
C1= 110
C2= 121
C0 = C1/(1+IRR) + C2/ (1+IRR)^2
We can find the IRR manually but a better way is to find the IRR using Excel.
IRR= 6.7%
Topic: Net present 49 hat is the IRR of a project with the following cash flows:...
If an independent project with conventional, or normal, cash flows is being analyzed, the net present value (NPV) and internal rate of return (IRR) methods agree Projects Y and Z are mutually exclusive projects. Their cash flows and NPV profiles are shown as follows. NPV (Dollars Year Project Y Project Z 800 -$1,500 -$1,500 0 $200 $900 1 600 Project Y $400 $600 2 $600 $300 400 $1,000 $200 4 Project Z 200 If the weighted average cost of capital...
If an independent project with conventional, or normal, cash flows is being analyzed, the net present value (NPV) and internal rate of return (IRR) methods agree. Projects W and X are mutually exclusive projects. Their cash flows and NPV profiles are shown as follows. NPV (Dollars) 800 0 -$1,00 Year Project W -$1,000 1 $200 2 $350 $400 $600 Project x -$1,500 $350 $500 $600 $750 Project X Project W If the weighted average cost of capital (WACC) for each...
Consider the following project Cash flows Cash flows Cash flows Projects CO C1 C2 A -30 20 20 What is the IRR of the project? A) 11.53% B) 21.53% C) 23.15% OD) 33.15%
14. Consider four projects with the following sequences of cash flows: n 0 NET CASH FLOWS A B C -$25,000|-$23,000-$56,500 $12,000 $32,000 -$2,500 $23,000 $32,000-$6,459 $34,000 $25,000 $88,345 3 (a) Identify all the simple investments. (b) Identify all the non-simple investments. (c) Compute the Internal Rate of Return (IRR) for each project using NPV method and Excel. Note the following: A simple (or conventional) investment is simply when one sign change occurs in the net cash flow series. If the...
Consider Project Theta, its time line of cash flows, and one of the project IRRs: Year....................0.............1............2............IRR Cash Flow......($200).....$850....($700)......15% What is the best decision for Project Theta (accept or reject) if the project’s required rate of return is 15% and why? a. Accept the project because the payback is short b. Accept the project because the NPV is greater than zero c. Reject the project because the IRR is less than the required rate of return d. Reject the project because...
If mutually exclusive projects with normal cash flows are being analyzed, the net present value (NPV) and internal rate of return (IRR) methods agree. Projects Y and Z are mutually exclusive projects. Their cash flows and NPV profiles are shown as follows. NPV (Dollars) 800 Year Project Y Project Z 0 -$1,500 -$1,500 1 $200 $900 2 $400 $600 $600 $300 4 $1,000 $200 Project Y Project 2 If the weighted average cost of capital (WACC) for each project is...
Consider Project Theta, its time line of cash flows, and one of the project IRRs: Year...................0..............1...............2...........IRR Cash Flow.....($200).....$850.......($700).......15% What is the best decision for Project Theta (accept or reject) if the project’s required rate of return is 15% and why? a. Reject the project because the NPV is less than zero b. Accept the project because the IRR is greater than zero c. Accept the project because the NPV is greater than zero d. Accept the project because the payback...
18) NET PRESENT VALUE (BASIC)What is the net present value of a project with the following cash flows if the discount rate is 14 percent?
If an investment project (with conventional cash flows) has IRR equal to the cost of capital, the NPV for that project is: Positive Negative Zero Unable to determine Question 13 (2 points) The following are measures used by firms when making capital budgeting decisions except: Payback period Internal rate of return P/E ratio 1. Net present value
A project has the following cash following cash flows for years zero through 3, respectively: -$3,500, $900, $1,800, $1,500. Is 10% the IRR for this project? A. No, the IRR is below 10% B. Yes, the IRR is 10% C. No, the IRR is above 10%