Homework Answers
| Year | cash flow |
| 0 | -154000 |
| 1 | 70234 |
| 2 | 50225 |
| 3 | 49468 |
| IRR =using IRR function in MS excel =irr(cell reference year 0 cash flow: cell reference year 3 cash flow) | 5.4% |
| No I would not invest as IRR is less than cost of capital | |
| Yes I would investment in the project as IRR is 6.1% and cost of capital is 6% so IRR is greater than 6% |
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Find the IRR of the investment in below. Your cost of capital is 6%. Should you...
2. You are considering an investment that requires you to lay out $14,800 and has the cash...
2. You are
considering an investment that requires you to lay out $14,800 and
has the cash inflows shown below. Use a 3% interest rate
to find the net present value and determine whether you should
invest. Justify your answer.
5 Find the net present value of the project below using a 5% discount rate. Should your firm invest in this project or the project in Problem 2? Justify your answer. 45,00 12,00 2 10,000 12,00 10,000 12,00
Management of a firm with a cost of capital of 10 percent is considering a $126,000 investment with annual cash flow of...
Management of a firm with a cost of capital of 10 percent is considering a $126,000 investment with annual cash flow of $52,460 for three years. Use Appendix A and Appendix D to answer the questions. What are the investment’s net present value and internal rate of return? Use a minus sign to enter a negative value, if any. Round your answers for the net present value to the nearest dollar and for the internal rate of return to the...
If an investment project (with conventional cash flows) has IRR equal to the cost of capital,...
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
Assignment: Capital Budgeting Decisions Your company is considering undertaking a project to expand an existing product...
Assignment: Capital Budgeting Decisions Your company is considering undertaking a project to expand an existing product line. The required rate of return on the project is 8% and the maximum allowable payback period is 3 years. time 0 1 2 3 4 5 6 Cash flow $ 10,000 2,400 4,800 3,200 3,200 2,800 2,400 Questions Evaluate the project using each of the following methods. For each method, should the project be accepted or rejected? Justify your answer based on the...
Capital Budgeting Analysis : A firm is planning a new project that is projected to yield cash flo...
Capital Budgeting Analysis : A firm is planning a new project that is projected to yield cash flows of - $595,000 in Year 1, $586,000 per year in Years 2 through 5, and $578,000 in Years 6 through 11. This investment will cost the company $2,580,000 today (initial outlay). We assume that the firm's cost of capital is 11%. (1) Draw a timeline to show the cash flows of the project. (2) Compute the project’s payback period, net present value...
. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...
. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,500,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Falcon Freight: Falcon Freight is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000. Falcon Freight has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,500,000 Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,500,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Falcon Freight is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,450,000. Falcon Freight has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the IRR method for capital...
2. You are
considering an investment that requires you to lay out $14,800 and
has the cash inflows shown below. Use a 3% interest rate
to find the net present value and determine whether you should
invest. Justify your answer.
5 Find the net present value of the project below using a 5% discount rate. Should your firm invest in this project or the project in Problem 2? Justify your answer. 45,00 12,00 2 10,000 12,00 10,000 12,00
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
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider the case of Falcon Freight: Falcon Freight is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000. Falcon Freight has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR...
2. Internal rate of return (IRR) The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,500,000 Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the...
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