Project X & Y has the following cashflow, evaluate the projects using the IRR criteria if...
Project X & Y has the following cashflow, evaluate the projects using the IRR criteria if the required rate is 16.15%. Should we accept or reject the project and why.
| Year | Cash Flow (X) | Cash Flow (Y) |
| 0 | -$20,000 | -$20,000 |
| 1 | 8,850 | 10,100 |
| 2 | 9,100 | 7,800 |
| 3 | 8,800 | 8,700 |
Homework Answers
Internal rate of return (IRR) is that rate which makes the net present value (NPV) zero. It is used in capital budgeting to help decide companies which projects to invest into. The thumb rule is to invest in projects where the IRR is greater than the required rate.
The IRR can be found as under for X
-20000 + 8850/(1+irr) + 9100/(1+irr)^2 + 8800/(1+irr)^3 = 0
The IRR can be found as under for Y
-20000+10100/(1+irr) + 7800/(1+irr)^2 + 8700/(1+irr)^3
Excel's function =IRR can be used to quickly solve for irr as shown below:
=IRR(values) have to be entered as shown.
Thus, the IRR for X comes out as 16.09% and IRR for Y comes out as 16.24%.
As the required return of return is 16.15%, project Y should be accepted as it has IRR greater than the required rate. Project X should be rejected as the IRR is lower than the required rate.
Add Answer to:
Project X & Y has the following cashflow, evaluate the
projects using the IRR criteria if...
Question 2 Year DKW Inc., has two projects offering Project X and Project Y. They are...
Question 2 Year DKW Inc., has two projects offering Project X and Project Y. They are mutually exclusive, and both require $350,000 for investment. The cost of capital is 10%. The following table are expected cash flow Project X ($) Project Y ($) 90,000 180,000 90,000 120,000 90,000 60000 90,000 50,000 90,000 50,000 90,000 2.1 Calculate Project X's the internal rate of return (IRR). Use formula of Time Value of Money to illustrate 23 Calculate payback period of both projects,...
Question 24 1 pts You are considering the following two mutually exclusive projects. Which project(s) should...
Question 24 1 pts You are considering the following two mutually exclusive projects. Which project(s) should be recommended? Project A Project B Year Cash Flow Year Cash Flow 0 $75,000 0 -$70,000 1 $19,000 1 $10,000 2 $48,000 2 $16,000 3 $12,000 3 $72,000 Required rate of return: 10 percent (for A) 13 percent (for B) O accept project B and reject project A. accept both project A and project B. O reject both project A and project B. O...
A firm evaluates all of its projects by applying the IRR rule. A project under consideration...
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 1 Cash Flow -$34,000 15,000 17,000 13,000 WN- If the required return is 14 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR I % Should the firm accept the project? Accept Reject
Consider two projects, A and B. Project A's first cash flow is $10,100 and is received...
Consider two projects, A and B. Project A's first cash flow is $10,100 and is received three years from today. Future cash flows for Project A grow by 4 percent in perpetuity. Project B's first cash flow is −$8,800, which occurs two years from today, and will continue in perpetuity. Assume that the appropriate discount rate is 12 percent. a. What is the present value of each project? (A negative answer should be indicated by a minus sign. Do not...
28. You are considering two independent projects. Project A has an initial cost of $125,000 and...
28. You are considering two independent projects. Project A has an initial cost of $125,000 and cash inflows of $46,000, $79,000, and $51,000. Project B costs $135,000 with expected cash flows of $50,000, $30,000, and $100,000. The required rate of return for both projects is 15%. Based on IRR, you should: (SHOW WORK) A) accept both projects B) accept Project A and reject Project B C) accept Project B and reject Project A D) reject both projects E) accept either...
A firm evaluates all of its projects by applying the IRR rule. A project under consideration...
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year Cash Flows 0 -$34,000 1 $15,000 2 $17,000 3 $13,000 1) If the required return is 14 percent, what is the IRR for this project? 2) Should the firm accept the project? A) Reject B) Accept
Consider Project Theta, its time line of cash flows, and one of the project IRRs: Year....................0.............1............2............IRR...
Consider Project Theta, its time line of cash flows, and one of the project IRRs: Year....................0.............1............2............IRR Cash Flow......($200).....$850....($700)......15% What is the best decision for Project Theta (accept or reject) if the project’s required rate of return is 15% and why? a. Accept the project because the payback is short b. Accept the project because the NPV is greater than zero c. Reject the project because the IRR is less than the required rate of return d. Reject the project because...
1. The most popular capital budgeting techniques used in practice to evaluate and select projects are...
1. The most popular capital budgeting techniques used in practice to evaluate and select projects are payback period, Net Present Value (NPV), and Internal Rate of Return (IRR). 2. Payback period is the number of years required for a company to recover the initial investment cost. 3. Net Present Value (NPV) technique: NPV is found by subtracting a project’s initial cost of investment from the present value of its cash flows discounted using the firm’s weighted average cost of capital....
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash...
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: points Year Cash Flow 0 29.000 13,000 16.000 12.000 eBook References If the required return is 15 percent. what is the IRR for this project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) IRR % Should the firm accept the project?
10. Calculating IRR [LO5] What is the IRR of the following set of cash flower Year...
10. Calculating IRR [LO5] What is the IRR of the following set of cash flower Year WN - O Cash Flow -$15,400 7,300 9,100 5,900 11. Calculating NPV [LO1] For the cash flows in the previous problem, what is the NPV at a discount rate of zero percent? What if the discount rate is 10 percent? If it is 20 percent? If it is 30 percent? 12. NPV versus IRR [LO1, 5] Bruin, Inc., has identified the following two mutually...
Question 2 Year DKW Inc., has two projects offering Project X and Project Y. They are mutually exclusive, and both require $350,000 for investment. The cost of capital is 10%. The following table are expected cash flow Project X ($) Project Y ($) 90,000 180,000 90,000 120,000 90,000 60000 90,000 50,000 90,000 50,000 90,000 2.1 Calculate Project X's the internal rate of return (IRR). Use formula of Time Value of Money to illustrate 23 Calculate payback period of both projects,...
Question 24 1 pts You are considering the following two mutually exclusive projects. Which project(s) should be recommended? Project A Project B Year Cash Flow Year Cash Flow 0 $75,000 0 -$70,000 1 $19,000 1 $10,000 2 $48,000 2 $16,000 3 $12,000 3 $72,000 Required rate of return: 10 percent (for A) 13 percent (for B) O accept project B and reject project A. accept both project A and project B. O reject both project A and project B. O...
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 1 Cash Flow -$34,000 15,000 17,000 13,000 WN- If the required return is 14 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR I % Should the firm accept the project? Accept Reject
28. You are considering two independent projects. Project A has an initial cost of $125,000 and cash inflows of $46,000, $79,000, and $51,000. Project B costs $135,000 with expected cash flows of $50,000, $30,000, and $100,000. The required rate of return for both projects is 15%. Based on IRR, you should: (SHOW WORK) A) accept both projects B) accept Project A and reject Project B C) accept Project B and reject Project A D) reject both projects E) accept either...
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: points Year Cash Flow 0 29.000 13,000 16.000 12.000 eBook References If the required return is 15 percent. what is the IRR for this project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) IRR % Should the firm accept the project?
10. Calculating IRR [LO5] What is the IRR of the following set of cash flower Year WN - O Cash Flow -$15,400 7,300 9,100 5,900 11. Calculating NPV [LO1] For the cash flows in the previous problem, what is the NPV at a discount rate of zero percent? What if the discount rate is 10 percent? If it is 20 percent? If it is 30 percent? 12. NPV versus IRR [LO1, 5] Bruin, Inc., has identified the following two mutually...
Most questions answered within 3 hours.
-
1. Choose the answer that is closest to the definition of a
significance level
a) If...
asked 24 minutes ago -
When light is refracted, on what does the angle of refraction
depend? Select all that apply....
asked 40 minutes ago -
A (726) g mass is hung on a spring. As a result the spring
stretches (16.5)...
asked 1 hour ago -
SOLUTION NOT NEEDED ONLY NEED THE ANSWERS, HOMEWORK IS DUE IN 30
MINUTES.
4)Which of the...
asked 2 hours ago -
You will select one card from a standard deck of 52 cards. What
is the probability...
asked 2 hours ago -
50% of the volume of a boat, sailing down the Mississippi (where
the water density ρ...
asked 2 hours ago -
Calculate how many moles of ions are in 1.4 L of 2.9 M KNO2
(aq). Remember...
asked 3 hours ago -
Experiment:
In the experiment: Mix together 74 g. (92 ml.) of n-butyl
alcohol and 120 g....
asked 4 hours ago -
This Python module will be menu driven
and use conditions to check user input in order...
asked 4 hours ago -
Tip Calculator App
For this project, you will create a tip calculator Android
app. The user...
asked 5 hours ago -
A first order chemical reaction has an energy of activation of
90.0 kJ/mol and a rate...
asked 6 hours ago -
Which statement is not correct?
Mutations change the sequence of nucleotides in DNA.
Mutations can be...
asked 8 hours ago