Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require...

Question

Question

Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial Inv

The project is expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 Year 3 $375,000 $500,000 $450,

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Ans 4.74%

Year	Project Cash Flows (i)	DF@ 12%	DF@ 12% (ii)	PV of Project A ( (i) * (ii) )	DF@ 2% (iii)	PV of Project A ( (i) * (iii) )
0	-1600000	1	1	(16,00,000.00)	1	(16,00,000.00)
1	375000	1/((1+12%)^1)	0.893	3,34,821.43	0.980	3,67,647.06
2	500000	1/((1+12%)^2)	0.797	3,98,596.94	0.961	4,80,584.39
3	450000	1/((1+12%)^3)	0.712	3,20,301.11	0.942	4,24,045.05
4	475000	1/((1+12%)^4)	0.636	3,01,871.09	0.924	4,38,826.58
	4.74%	NPV		(2,44,409.43)	NPV	1,11,103.08



	IRR =	Ra + NPVa / (NPVa - NPVb) * (Rb - Ra)
		2% + 111103.08 / (111103.08 + 244409.43)*10%
		4.74%

Add a comment

Answer 2

Similar Homework Help Questions

Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require...

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 IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Llama Mining Company's WACC is...
Consider the following case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project...

Consider the following 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 IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Llama...
Consider the following case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project...

Consider the following 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 IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Llama...

Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require...

Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,450,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Llama Mining Company’s WACC is...
Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require...

Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Blue Llama Mining Company's WACC is...
Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require...

Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $900,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Blue Llama Mining Company’s WACC is...

Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require...

Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $800,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Blue Llama Mining Company’s WACC is...
Blue Pencil Publishing is evaluating a proposed capital budgeting project (project Delta) that will require an...

Blue Pencil Publishing is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,450,000. Blue Pencil Publishing has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Pencil Publishing's WACC is 8%, and project...
should accept/reject Blue Ulama Mining Company is evaluating a proposed capital budgeting project (project Delta) that...

should accept/reject Blue Ulama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an IMUS Investment Or $1,40UUUU The company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Llama Mining Company's WACC is...

Q Search this course Ch 11: Assignment - The Basics of Capital Budgeting X The internal...

Q Search this course Ch 11: Assignment - The Basics of Capital Budgeting X 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 flows. Consider the case of Blue Llama Mining Company: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $850,000 Blue Llama Mining Company has been basing capital budgeting decisions on...

Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require...

Homework Answers