The use of IRR can create challenges when cash flows are unconventional and when investments are delayed.
Unconventional cash flows: A series of cash outflows, cash inflows, and again cash outflows.
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V 2 pts The use of IRR can create challenges when cash flows are and when...
1. Find an internal rate of
return (IRR) for these cash flows.
2. Should you use the IRR you calculated in the previous
question to decide whether the project is acceptable? Explain
Please show all work. Thank you!
Use the following information to answer the next two questions. Consider the after-tax cash flows below: Year O 1 2 3 4 Cash Flow -$75,000| $5,3001 -$1,300 $498,000-$336,000 The required rate of return is 13.6 percent.
What is the IRR of the following set of cash flows? Annual cash flows: $ Year 0 (13,900) 6,400 8,700 5,900 Year 1 $ Year 2 $ $ Year 3 Complete the following analysis. Do not hard code values in your calculations. IRR EA EEA EA
Calculating IRR What is the IRR of the following set of cash flows? Year Cash Flow -$19.400 10,400 9,320 6,900
The IRR evaluation method assumes that cash flows from the project are reinvested at a rate equal to the project’s IRR. However, in reality, the reinvested cash flows may not necessarily generate a return equal to the IRR. Thus, using the modified IRR approach, you can make a more reasonable estimate of a project’s rate of return than the project’s IRR can. Consider the following situation: Green Caterpillar Garden Supplies Inc. is analyzing a project that requires an initial investment...
Calculating IRR [LO5] what is the IRR the following set of cash
flows?
Year Cash Flow -$16,800 9,800 9,400 8,600
Find IRR for following cash flows: 0_____1_____2_____3_____4 ($100) $10 $10 $10 $110 a) use calculator, make sure that you know the procedure. p/yr=____, N=____, PMT=_____, FV=_____,PV=_____, IRR=____% per period. b) use spreadsheet, make sure that you know the procedure Show spreadsheet printout c) use intuition: if initial cashflow is changed to (90) the IRR will be Higher/lower because _________________________________ Hint: Consider the impact of a higher discount rate on the PV of a...
5) (15 pts total) Consider the cash flows and Project B Section 2 Problems sider the cash flows from two mutually exclusive projects, Project A Year Cash Flow (Proj A) -200 20 120 160 Cash Flow (Proj B) -200 140 100 40 a) (5 pts) Construct NPV profiles for each project and graph them (one graph - both profiles). b) (5 pts) Compute the crossover rate e (5 pts) Briefly explain the conflict that arises between the NPV and the...
Question 7 2 pts The IRR of System 1 is 83.93 percent and the IRR of System 2 is 50.07 percent. The NPV of System 1 is $22,969.42 and the NPV of System 2 is $36,001.43. System 1 delivers a higher IRR because it requires a lower initial investment and the cost is recovered the first year. Thus, even with lower cash inflows in the years after startup, System 1 is able to deliver a higher return on the initial...
2. Calculate the IRR for the following cash flows. Is the project acceptable if the firm's cost of capital is 12%? End of Year Cash Flow ($) -$500,000 1 150,000 2 250,000 3 310,000 ه|اباد) 3. Calculate the PI for the following cash flows assuming the firm's cost of capital is 9%. Is the project acceptable? End of Year Cash Flow ($) -$365,000 1 70,000 2 230,000 3 335,000 اها | اس
The IRR evaluation method
assumes that cash flows from the project are reinvested at the same
rate equal to the IRR. However, in reality the reinvested cash
flows may not necessarily generate a return equal to the IRR. Thus,
the modified IRR approach makes a more reasonable assumption other
than the project’s IRR.
4. Modified internal rate of return (MIRR) The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the...