Observe the graph below and identify the internal rate of return. Assume that the discount rate is 8%. What is the net present value of the project? Briefly explain if the project is viable or not? NPV 50000 40000 30000 20000 10000 4 6. 10 12 14 16 18 20 22 24 . 26 28 -10000 discount rate

Observe the graph below and identify the internal rate of return. Assume that the discount rate is 8%. What is the net present value of the project? Briefly explain if the project is viable or not? NPV 50000 40000 30000 20000 10000 4 6. 10 12 14 16 18 20 22 24 . 26 28 -10000 discount rate

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 2P

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

Observe the graph below and identify the internal rate of return. Assume that the
discount rate is 8%. What is the net present value of the project? Briefly explain if the
project is viable or not?
NPV
50000
40000
30000
20000
10000
4
10
12
14
16
18
20
22
24 • 26
28
-10000
discount rate
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