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QUESTION 2 Suppose that you consider the following project. Year 0 3000 Year 1 -1000 Year...
Consider the following two projects: Project Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Discount C/F C/F C/F C/F C/F C/F C/F C/F Rate Alpha - 79 20 25 30 35 40 NA NA 15% Beta - 80 25 25 25 25 25 25 25 16% Assume that projects Alpha and Beta are mutually exclusive. The correct investment decision and the best rationale for that decision is to O A invest in...
A project has the following expected cash flows: Year 0 Year 1 Year 2 Year 3 ($1,480) $640 $250 $300 Assume the risk-adjusted discount rate (k)(k) is 7.8%. Based on the IRR rule, should you accept or reject this project? Use Excel or a financial calculator. Cannot be determined. No, the project should be rejected. Yes, the project should be accepted.
Consider the following two projects: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Discount Project C/F C/F C/F C/F C/F C/F Rate Alpha -30 20 25 30 35 4 0 15% Bet =80255 255 25 16 a) Which project would you choose based on the NPV rule? b) Draw a graph showing the IRR, if IRR for project Alpha is 20% and IRR for project Beta is 22%. ਜਾ ਰ ਰ ਰ .
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...
Project 1 Project 2 Year o Year 1 Year 2 Year 3 IRR -10000 3500 3500 4500 7.0% -10000 1000 2000 8500 5.4% Project 3 -10000 9000 1500 1000 11.5% Project 4 -10000 2000 8500 1000 7.6% Project 5 -10000 11000 0 0 10.0% Q5: Based on independent research, why is IRR preferred to NPV? Cite your source. Type answer here. Q6: How does IRR help managers determine where to spend capital? Type answer here. Q7: Based on the project...
You are considering opening a new plant. The plant will cost $99.5 million upfront and will take one year to build. After that, it is expected to produce profits of $29.2 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8.1%. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule? Years...
Question 10: Consider the following cash flow profile and assume MARR is 12%/year. 0 1 2 3 End of Year Cash Flow -1000 3400 -5700 3800 a. What does Descartes' rule of signs tell us about the IRR (8) of this project? b. What does the Norstrom's criterion tell us about the IRR (s) of this project? c. Determine the ERR for this project. Is this project economically attractive?
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...
You are evaluating two mutually exclusive projects. Project 1 has an NPV of $3000 and an IRR of 15%. Project 2 has expected cash flows of - $22,477 in year 0, $14,236 in year 1, $11,904 in year 2 and $10,013 in year 3. If there is a required rate of 10% on both projects, what is the Net Present Value of Project 2? (Think about but do not answer on line; which project would you choose?
You are considering opening a new plant. The plant will cost $95.5 million upfront and will take one year to build. After that, it is expected to produce profits of $29.1 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 6.5%. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule? Here...