1.
Time |
Cash Flows |
0 |
($200,000) |
1 |
0 |
2 |
0 |
3 |
0 |
4 |
0 |
5 |
0 |
6 |
0 |
7 |
0 |
8 |
0 |
9 |
0 |
10 |
$5,000,000 |
The internal rate of return of this cash flow stream is between 37% and 38%.
True
False
2.
Time |
Cash Flows |
0 |
($100,000) |
1 |
0 |
2 |
0 |
3 |
0 |
4 |
0 |
5 |
0 |
6 |
0 |
7 |
0 |
8 |
0 |
9 |
0 |
10 |
0 |
11 |
0 |
12 |
$400,000 |
The internal rate of return of this cash flow stream is between 12% and 13%.
True
False
3.
Time |
Cash Flows |
0 |
($1,000,000) |
1 |
0 |
2 |
0 |
3 |
0 |
4 |
0 |
5 |
0 |
6 |
0 |
7 |
0 |
8 |
0 |
9 |
0 |
10 |
$3,000,000 |
The internal rate of return of this cash flow stream is between 9% and 10%.
True
False
4.
Time |
Cash Flows |
0 |
($400,000) |
1 |
0 |
2 |
0 |
3 |
0 |
4 |
0 |
5 |
0 |
6 |
0 |
7 |
0 |
8 |
0 |
9 |
0 |
10 |
$5,000,000 |
The internal rate of return of this cash flow stream is between 25% and 27%.
True
False
5.
Time |
Cash Flows |
0 |
($100,000) |
1 |
0 |
2 |
0 |
3 |
0 |
4 |
400,000 |
The internal rate of return of this cash flow stream is between 41% and 42%.
True
False
Part 1:
FV = PV (1+r)^n
5000000 = 200000 (1+r)^10
(1+r)^10 = 5000000 / 200000
= 25
1+r = 25^(1/10)
= 1.3797
r = 1.3797 - 1.
= 0.3797 i.e 37.97%
True
Part 2:
FV = PV (1+r)^n
400000 = 100000 (1+r)^12
(1+r)^12 = 400000 / 100000
= 4
1+r = 4^(1/12)
= 1.1225
r = 1.1225 - 1.
= 0.1225 i.e 12.25%
True
Part 3:
FV = PV (1+r)^n
3000000 = 1000000 (1+r)^10
(1+r)^10 = 3000000 / 1000000
= 3
1+r = 3^(1/10)
= 1.1161
r = 1.1161 - 1.
= 0.1161 i.e 11.61%
False
Part 4:
FV = PV (1+r)^n
5000000 = 400000 (1+r)^10
(1+r)^10 = 5000000 / 400000
= 12.5
1+r = 12.5^(1/10)
= 12873
r = 1.2873 - 1.
= 0.2873 i.e 28.73%
False
Part 5:
FV = PV (1+r)^n
400000 = 100000 (1+r)^4
(1+r)^4 = 400000 / 100000
= 4
1+r = 4^(1/4)
= 1.4142
r = 1.4142 - 1.
= 0.4142 i.e 41.42%
True
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