ZuoTi.Pro
Question

You are offered an asset costing $900 that has cash flows of $200 at the end...

You are offered an asset costing $900 that has cash flows of $200 at the end of each of the next 10 years. If the appropriate discount rate for the asset is 12%, SHOULD YOU purchase it based on its NPV? (yes or no and explain why) What is the IRR of the asset?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

44 Year Cash flows | PVIF@12% Present value 45 1.000 $ 0.893 $ 0.797 $ 0.712 $ 0.636 $ 0.567 $ 0.507 $ 0.452 $ 0.404 $ 0.361 $ 0.322 $ 900.00) 178.57 159.44 142.36 127.10 113.49 101.33 90.47 80.78 72.12 64.39 900 47 49 50 51 52 6 53 200 200 200 200 4 200 200 200 200 55 9$ 56 10S 57 581 IRRI 17.96% 59 60 Net present value$230.04 61 62 Yes, lt should purchase.

0 0
Add a comment
Know the answer?
Add Answer to:
You are offered an asset costing $900 that has cash flows of $200 at the end...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Please use excel, need help with functions and setting up cash flows in Excel because I...

    Please use excel, need help with functions and setting up cash flows in Excel because I am only used to using a financial calculator, thanks! You are offered an asset costing $900 that has cash flows of $200 at the end of each of the next 10 years. If the appropriate discount rate for the asset is 12%, should you purchase it based on its NPV? What is the IRR of the asset?

  • 16) You are offered an investment that will pay the following cash flows at the end...

    16) You are offered an investment that will pay the following cash flows at the end of each of the next five years at a cost of $800. What is the Net Present Value (NPV) if the required rate of return is 12% per year? Period Cash Flow 0 $0 1 $100 2 $200 3 $300 4 $400 5 $500 Remember that Excel’s NPV function doesn't really calculate the net present value. Instead, it simply calculates the present value of...

  • Suppose you are offered a project with the following payments: Year Cash Flows 0 $ 9,700...

    Suppose you are offered a project with the following payments: Year Cash Flows 0 $ 9,700 1. − 5,200 2. − 3,900 3. − 3,000 4. − 1,600 a. What is the IRR of this offer? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR % b. If the appropriate discount rate is 14 percent, should you accept this offer? Accept Reject c. If the appropriate discount rate is 20...

  • Suppose you are offered $7,300 today but must make the following payments:    Year Cash Flows...

    Suppose you are offered $7,300 today but must make the following payments:    Year Cash Flows ($) 0 $ 7,300          1 −4,000          2 −2,700          3 −1,800          4 −1,200             a. What is the IRR of this offer? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))      IRR %   b. If the appropriate discount rate is 10 percent, should you accept this offer? Reject Accept    c. If the appropriate...

  • Suppose you are offered a project with the following payments: Year Cash Flows 0 $ 8,900...

    Suppose you are offered a project with the following payments: Year Cash Flows 0 $ 8,900 1 − 4,600 2 − 3,300 3 − 2,400 4 − 1,700 a. What is the IRR of this offer? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR 15.96 15.96 Correct % d-1. What is the NPV of the offer if the appropriate discount rate is 11 percent? (A negative answer should be...

  • Your firm is considering two projects with the following cash flows: Cash flows from project B...

    Your firm is considering two projects with the following cash flows: Cash flows from project B (£000) (500) 200 250 170 25 30 Year Cash flows from project A (£000) 0(500) 167 180 160 100 100 4 1. Calculate the ARR and payback rule 2. If the appropriate discount rate is 12%, rank the two projects 3. Which project is preferred if you rank by IRR? 4. Calculate the discount rate (r) for which the NPVs of both projects are...

  • NPV and IRR A project that costs $712,277.54 to install will provide annual cash flows of...

    NPV and IRR A project that costs $712,277.54 to install will provide annual cash flows of $144,000.00 for each of the next 9 years. a. Calculate the NPV if the discount rate is 7.40%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)   NPV $    b. Is this project worth pursuing? Yes No c. How high can the discount rate be before you would reject the project (i.e. What is the projects IRR)? (Do not round intermediate...

  • 3. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should...

    3. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent? Year Project A Project B -$80,000 -$80,000 31,000 31,000 0 31,000 110,000 A. accept project A as it always has the higher NPV B. accept project B as it always has the higher NPV C. accept A at 8.5 percent and B at 13 percent D. accept...

  • NPV and IRR Each of the following scenarios is independent. All cash flows are after-tax cash...

    NPV and IRR Each of the following scenarios is independent. All cash flows are after-tax cash flows. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be $718,000 per year. The system costs $3,897,000 and will last eight years. Compute the NPV assuming a discount rate of 8 percent. Should the company buy...

  • Someone has offered to buy you a financial instrument that has the following cash flows: -...

    Someone has offered to buy you a financial instrument that has the following cash flows: - You will not receive any cash for the first 7 years. The first time you will receive a cash low will be at the year 10 end of year 8. You will receive $100 at the end of year 8, $200 at the end of year 9, and $300 at the end of - You will receive another payment of $200 at the end...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT