Question

* CENGAGE MINDIA Ch 11: End-of-Chapter Problems - The Basics of Capital Budgeting < Back to Aliment Attempts: Keep the Highes
0 0
Add a comment Improve this question Transcribed image text
Answer #1

Internal rate of return (IRR) for the Project

The Present Value factor for determining IRR = Initial Investment Cost / Net Annual Cash Inflow

= $48,457.36 / $10,000 per year

= 4.845736

From the Present Value Annuity Factor Table (PVAIF Table), the discount rate (IRR) corresponding to the factor of 4.845736 for 11 Years is closest to 16.95%.

“Hence, the Internal rate of return (IRR) for the Project will be 16.95%”

Add a comment
Know the answer?
Add Answer to:
* CENGAGE MINDIA Ch 11: End-of-Chapter Problems - The Basics of Capital Budgeting < Back to...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

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
  • Ch 11: End-of-Chapter Problems - The Basics of Capital Budgeting apshotid=12980728 a Search this course <...

    Ch 11: End-of-Chapter Problems - The Basics of Capital Budgeting apshotid=12980728 a Search this course < Back to Assignment 0 x Attempts: 3. Problem 11.03 Keep the Highest: /1 Click here to read the eBook: Modified Internal Rate of Return (MIRR) MIRR Project L costs $40,000, its expected cash inflows are $12,000 per year for 8 years, and its WACC is 13%. What is the project's MIRRT Round your answer to two pecimal places. Do not round your intermediate calculations....

  • ch 11: End-of-Chapter Problems - The Basics of Capital Budgeting Q Search Back to Assignment Attempts:...

    ch 11: End-of-Chapter Problems - The Basics of Capital Budgeting Q Search Back to Assignment Attempts: Keep the Highest: 11 1. Problem 11.01 Click here to read the eBook: Net Present Value (NPV) NPV Project L costs $70,000, its expected cash inflows are $13,000 per year for 12 years, and its WACC is 10%. What is the project's NPV? Round your answer to the nearest cent. Do not round your Intermediate calculations. Sare Cortina Continue without saving

  • 115 - The Basics of Capital Budgeting < Back to Assignment Q Search this course Attempts:...

    115 - The Basics of Capital Budgeting < Back to Assignment Q Search this course Attempts: 0 2. Problem 11.02 0 Keep the Highest: 1 x Click here to read the eBook: Internal Rate of Return (IRR) IRR Project L costs $40,955.09, its expected cash inflows are $9,000 per year for 10 years, and its WACC I 11. What is the project R answer to two decimal places. u nd you Continue without

  • CENGAGE MINDIAP Q Search this cours Ch 10: End-of-Chapter Problems - The Cost of Capital <...

    CENGAGE MINDIAP Q Search this cours Ch 10: End-of-Chapter Problems - The Cost of Capital < Back to Assignment Attempts: 0 Keep the Highest: 0/1 3. Problem 10.03 Click here to read the eBook: The Cost of Retained Earnings, is COST OF COMMON EQUITY Pearson Motors has a target capital structure of 45% debt and 55% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 12%, and its tax rate is 40%. Pearson's...

  • Ch 11: Assignment - The Basics of Capital Budgeting The internal rate of return (IRR) refers...

    Ch 11: Assignment - The Basics of Capital Budgeting 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 cash flows. Consider this case of Blue Llama Mining Company: 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,...

  • Ch 11: Assignment - The Basics of Capital Budgeting The net present value (NPV) and internal...

    Ch 11: Assignment - The Basics of Capital Budgeting The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to make capital budgeting decisions. Consider the case of Blue Hamster Manufacturing Inc.: Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of its planning and financial data when both its main and its backup servers crashed. The company's CFO remembers that the internal rate of return (IRR) of...

  • Ch 10: End-of-Chapter Problems - The Cost of Capital Q Search this course o < Back...

    Ch 10: End-of-Chapter Problems - The Cost of Capital Q Search this course o < Back to Assignment 0 x Attempts: Keep the Highest: /1 10. Problem 10.10 Click here to read the eBook: Basic Definitions WACC Olsen Outfitters Inc. believes that its optimal capital structure consists of 70% common equity and 30% debt, and its tax rate is 40%. Olsen must raise additional capital to fund its upcoming expansion. The firm will have $1 million of retained earnings with...

  • Ch 11: Assignment - The Basics of Capital Budgeting 4. M ed internas ra Orreur (PKK)...

    Ch 11: Assignment - The Basics of Capital Budgeting 4. M ed internas ra Orreur (PKK) 0 x 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 assumpe other than the project's IRR. Consider the following situation: Grey Fox Aviation Company is...

  • 10 ildpter Problems - The Basics of Capital Budgeting Search this course < Back to Assignment...

    10 ildpter Problems - The Basics of Capital Budgeting Search this course < Back to Assignment Attempts: Keep the Highest: /1 9. Problem 11.13 Click here to read the eBook: Modified Internal Rate of Return (MIRR) Problem Walk-Through MIRR A firm is considering two mutually exclusive projects, X and Y With the following cash flows: Project X -$1,000 $110 $280 $400 $650 Project Y $1,000 $1,000 $110 $45 $45 The projects are equally risky, and their WACC is 13%. What...

  • 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...

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