a.
Using IRR function in Excel
Time | Cash Flow A | Time | Cash Flow B |
Year 0 | 2500 | Year 0 | 1800 |
Year 1 | 3500 | Year 1 | 1600 |
Year 2 | -6600 | Year 2 | -3600 |
IRR | 6.9% | IRR | 3.8% |
Showing formula in excel
Time | Cash Flow A | Time | Cash Flow B |
Year 0 | 2500 | Year 0 | 1800 |
Year 1 | 3500 | Year 1 | 1600 |
Year 2 | -6600 | Year 2 | -3600 |
IRR | =IRR(F4:F6) | IRR | =IRR(H4:H6) |
b.
As the interest rate on loan in option B, it should be selected as we need to pay less interest
Consider 2 loan opportunities where you receive payments today and at the end of the year,...
If you took $75,000 from the bank as a loan at 6% interest per year and paid amounts back as shown in the table below, how much will you still owe at the end of 8 years? see cash flow below Using excel formula which of the following answers would it be, please show work....... $42,320 $48,765 $56,876 $62,765 Year Cash Flow 0 ($75,000) 1 $0 2 $2,500 3 $45,000 4 $2,500 5 $1,500 6 $0 7 $3,500 8 $4,800
You have the choice between 2 loans. Option A is a 15 year loan at 6.5% with a 2 point fee. Option B is a 20 year loan at 7% with a 2.5% fee. Which loan should you take and why? Support the answer with both math and logic
1. Determine the IRR of the following. (Hint: If you use the financial calculator app, there is an IRR and NPV calculator option). A) Define IRR. Provide an example of how companies may use it. B) An initial investment of $10,750 resulting in a free cash flow of $3,500 at the end of year 1, $2,000 at the end of year 2, and $7,000 at the end of year 3. C) An initial investment of $5,000 resulting in a SINGLE...
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...
The Don'tYouLoveFinance? Company borrows $500,000 today to be repaid in equal end-of-year payments over 10 years. The loan has an interest rate of 5%/year. a) (6 points) What is the equal payment at the end of each of the 10 years? SHOW ALL WORK using the time value of money buttons on the TI BAII Plus Calculator for full credit. b) (3 points) Using the AMORT function on the calculator, what is the loan balance at the end of year...
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...
9.(10 points) A U.S-based construction compan The company will recoup invested USS 200 million by receiving Bt 2,500 million at the end of year 1 million at the end of year 2, and Bt 2,500 million at the end of year 3. The current exchange rate is B Financial market data suggests that the Baht will depreciate at 3.5% per year in the near term and that the dollar cost of capital is 12.00% Report all Baht and dollar figures...
2. A S20,000 loan obtained today is to be repaid in equal monthly installments over the next seven years. If the annual interest rate is 6%, compounded monthly, how mnch is to be paid each month? (9) 3. An investment of $150,000 is expected to generate an after-tax cash flow of $100,000 in year one and another $120,000 in year two. The cost of capital is 10%. a. What is the NPV of this project? Based on the NPV technique,...
Exercise 2-14 Post transactions to Cash T-account (LO2-5) Consider the following transactions. 1. Receive cash from customers, $15,600. 2. Pay cash for employee salaries, $9,600. 3. Pay cash for rent, $3,600 4. Receive cash from sale of equipment, $8,600. 5. Pay cash for utilities, $1,600. 6. Receive cash from a bank loan. $4,600 7. Pay cash for advertising, $7,600 8. Purchase supplies on account, $3,600 Required: Post transactions to the Cash T-account and calculate the ending balance Cash Beg. bal....
4. Harrison, Inc. is considering two investment opportunities. Each investment costs $7.000 (i.e.. year 0 cash flow associated with each opportunity is -$7.000) and will provide the same total future cash inflows. The schedule of estimated cash receipts for each investment follows (assume cash is received at year-end): Year Investment Investment II $4,000 $2,500 $2,000 $2,000 $3,000 $1,500 $4,000 Total Cash Flow $10,000 $10,000 Which investment should Harrison choose assuming all other variables for the two investments are the same...