Question

is 4b correct? and how do you do 5?

Problem 4: Calculating NPV. For the cash flows in the previous problem, suppose the firm uses NPV to evaluate projects. 4a. At a required return of 11% the projects NPV is $0513 4a. Points: 5 b. At a required return of 20% the projects NPV is $15. Points: 5 Problem 5: Calculating NPV and IRR. A project that provides annual cash flows of $ 1,710 for 10 years costs $ 7,560 today. 5a. The NPV is $ 5a. Points: 3 5b. The NPV is 5b. Points: 3 if the required rate of return is 10% _if the required rate of return is 24%. SC. At what discount rate would you be indifferent between accepting the project and rejecting it? I would be indifferent at %. 5c. Points: 4 Problem 6: Calculating NPV and IRR. Use the following set of cash flows to calculate the NPV and IRR. Year Cash flow -6,500 0 0 1 6,800 2.700 if the required rate of return is 9%. 6a. The NPV is $ 6a. Points: 2.5 6b. The NPV is $ 6b. Points: 2.5 if the required rate of return is 19% if the required rate of return is 29%. 6c. The NPV is $ 6c. Points: 2.5 6d. The IRR is 6d. Points: 2.5

Answer 1

Problem 4 : There is no cashflows mentioned, so that I cant check it. Sorry

Problem 5

	a	b	a*b
Year	Cashflow	PV factor 10% [1/(1+r)]^n	PV
0	(7,560.00)	1.000	(7,560.00)
1	1,710.00	0.909	1,554.55
2	1,710.00	0.826	1,413.22
3	1,710.00	0.751	1,284.75
4	1,710.00	0.683	1,167.95
5	1,710.00	0.621	1,061.78
6	1,710.00	0.564	965.25
7	1,710.00	0.513	877.50
8	1,710.00	0.467	797.73
9	1,710.00	0.424	725.21
10	1,710.00	0.386	659.28
	NPV of the project at 10%		2,947.21

	a	b	a*b
Year	Cashflow	PV factor 24% [1/(1+r)]^n	PV
0	(7,560.00)	1.000	(7,560.00)
1	1,710.00	0.806	1,379.03
2	1,710.00	0.650	1,112.12
3	1,710.00	0.524	896.87
4	1,710.00	0.423	723.28
5	1,710.00	0.341	583.29
6	1,710.00	0.275	470.40
7	1,710.00	0.222	379.35
8	1,710.00	0.179	305.93
9	1,710.00	0.144	246.72
10	1,710.00	0.116	198.97
	NPV of the project at 24%		(1,264.03)

NPV of the project at 10%		$ 2,947.21
NPV of the project at 24%		$ (1,264.03)
Difference		4,211.24
IRR of project	10 + (14*(2947.21/4211.24))
IRR of project	18.46%

Cashflows at IRR

	a	b	a*b
Year	Cashflow	PV factor 18.46% [1/(1+r)]^n	PV
0	(7,560.00)	1.000	(7,560.00)
1	1,710.00	0.844	1,443.53
2	1,710.00	0.713	1,218.58
3	1,710.00	0.602	1,028.68
4	1,710.00	0.508	868.38
5	1,710.00	0.429	733.06
6	1,710.00	0.362	618.82
7	1,710.00	0.305	522.39
8	1,710.00	0.258	440.98
9	1,710.00	0.218	372.26
10	1,710.00	0.184	314.25
	NPV of the project		(0.00)