Corporate Finance Npv Irr Essay
1. Assignment Part A
Prepare the case, with recommendations to be presented to the Board of Directors of ProGen. Assess the viability of the project using the NPV, IRR, and Payback methods.
2. Assignment Part B
“The IRR rule is redundant as an investment criterion because the NPV rule always dominates. Discuss this statement giving examples where possible.
3. Conclusion
“The IRR rule is redundant as an investment criterion because the net present value (NPV) rule always dominates it.”
4. Bibliography
References
Assignment Part A
This report evaluates the viability for marketing and distribution of genetically …show more content…
• Assume discount rate of 11%
Discount rate 11%   
0 (650) (650)  
1 (1935) (2,585) 1 
2 (664) (3,299) 1 
3 (240) (3489) 1 
4 1414 (2075) 1 
5 2,500 425 0.8 
Sensitivity Analysis
A discount rate or over 14.7 % would result in a negative NPV
A reduction in net cash over £115m per annum over 5 years would result in a zero NPV
NPV =  650 + 1773 + 622 + 217 + 1240 + 2122 = 0
1.11 (1.11)2 (1.11)3 (1.11)4 (1.11)5
IRR =  650 + 1773 + 622 + 217

Different Forms of Calculations: NPV and IRR
561 Words  2 PagesProblem One Problem is a simple NPV calculation that combines common sense with its practical implications. The first questions asked for the NPV of a series of cash flows with a discount rate of zero percent. In this instance, investors are not assuming any risk associated with lending the money over the three year period. As such, the NPV will be position as the cash flows are not being discounted. This situation, although rare, is prevailing in our current market economy with interest rates…

A Brief on Corporate Finance Ratios
2326 Words  10 Pagesrisk+operational risk = business risk + financial risk = total firm’s risk EVA = EBIT – TAX = the aftertax operating profit (sometimes referred to as net operating profit after taxes or NOPAT) * Less the dollar cost of the capital employed to finance these assets = COST OF CAPITAL Invested Capital = Cash + Net fixed assets + WCR (investment the firm must make to support its operating cycle is the sum of its inventories and accounts receivable minus its accounts payable) WCR = (Accounts receivable…

Corporate Finance
1635 Words  7 Pagesexcluded all financing charges and noncash items (i.e. depreciation), and were calculated on an aftercorporatetax basis. The New Heritage’s corporate tax rate is 40%. We think that the Design Your Own Doll project is more compelling. 2. Use the operating projections for each project to compute a NPV for each. Which project creates more value? (Please find the calculations in the attachment) NPV calculations include a terminal value computed as the value of a perpetuity growing at constant rate…

Npv vs. Irr
959 Words  4 PagesNPV Versus IRR W.L. Silber I. Our favorite project A has the following cash flows: 1000 0 0 1 0 2 +300 3 +600 4 +900 5 We know that if the cost of capital is 18 percent we reject the project because the net present value is negative:  1000 + 300 600 900 + + = NPV 3 4 (1.18) (1.18) (1.18)5  1000 + 182.59 + 309.47 + 393.40 = 114.54 We also know that at a cost of capital of 8% we accept the project because the net present value is positive:  1000 + 300 600 900 + + = NPV 3 4 (1.08 ) (1…

Assignment of Npv and Irr
5270 Words  22 Pagespresent value the net present value (NPV) or net present worth (NPW)[of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows of the same entity. In the case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash…

Npv vs Irr
1099 Words  5 PagesHow do the results of the NPV technique relate to the goal of maximizing shareholder wealth? The NPV technique measures the present value of the future cash flows that a project will produce. A positive NPV means that the investment should increase the value of the firm and lead to maximizing shareholder wealth. A positive NPV project provides a return that is more than enough to compensate for the required return on the investment. Thus, using NPV as a guideline for capital investment decisions…

Corporate Finance Case Study
1402 Words  6 PagesSolution to Case 23 Evaluating Project Risk It’s Better to Be Safe Than Sorry! Questions: 1. What seems to be wrong with the way the NPV of each project has been calculated? Indicate without any calculations, how Pete and John should go about recalculating the projects’ NPVs. The NPV of each project has been calculated by discounting the cash flows at the 8% beforetax cost of debt. This is incorrect. Since the company has debt, preferred stock and common…

Notes for Corporate Finance
2082 Words  9 PagesCorporate Finance Notes * Chapter One: Introduce to Corporate Finance 1. Three Questions: A. What Longterm asset should be invested? Capital Budgeting B. How to raise cash for capital expenditures? Capital Structure C. How to manage shortterm cash flow? Net Working Capital 2. Capital Structure: Marketing Value of Firm = MV of Debt + MV of Equity 3. Finance perspect and Accountant perspect: Finance: Cash Flow ! Accountant: A/R means profit ! 4. Sole proprietorship…

Corporate Finance
174197 Words  697 PagesEnd of Chapter Solutions Corporate Finance 8th edition Ross, Westerfield, and Jaffe Updated 11212006 CHAPTER 1 INTRODUCTION TO CORPORATE FINANCE Answers to Concept Questions 1. In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm’s management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act…

Corporate Finance
69408 Words  278 PagesCorporate finance P. Frantz, R. Payne, J. Favilukis FN3092, 2790092 2011 Undergraduate study in Economics, Management, Finance and the Social Sciences This subject guide is for a Level 3 course (also known as a ‘300 course’) offered as part of the University of London International Programmes in Economics, Management, Finance and the Social Sciences. This is equivalent to Level 6 within the Framework for Higher Education Qualifications in England, Wales and Northern Ireland (FHEQ). For more information…
More about Corporate Finance Npv Irr Essay

Different Forms of Calculations: NPV and IRR
561 Words  2 Pages 
A Brief on Corporate Finance Ratios
2326 Words  10 Pages 
Corporate Finance
1635 Words  7 Pages 
Npv vs. Irr
959 Words  4 Pages 
Assignment of Npv and Irr
5270 Words  22 Pages 
Npv vs Irr
1099 Words  5 Pages 
Corporate Finance Case Study
1402 Words  6 Pages 
Notes for Corporate Finance
2082 Words  9 Pages 
Corporate Finance
174197 Words  697 Pages 
Corporate Finance
69408 Words  278 Pages