ACCT.PRINCIPLES (LL)-PACKAGE
14th Edition
ISBN: 9781119707103
Author: Weygandt
Publisher: WILEY
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Question
Chapter 27, Problem 12Q
To determine
IRR (
IRR is the method that determines the percentage of return at which the
: The necessary steps used in IRR in the case of the same annual
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Which of the following methods consider the time value of money?
A. payback and accounting rate of return
B. payback and internal rate of return
C. internal rate of return and accounting rate of return
D. internal rate of return and net present value
Determine the rate of return for the following cash flow using trail & error approach with linear interpolation.
For the cash flows shown and in preparation for a PW-based rate of return analysis, determine the incremental cash flow between machines B and Afor (a) year 0, (b) year 3, and (c) year 6.
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- Which of the following discounts future cash flows to their present value at the expected rate of return, and compares that to the Initial Investment? A. internal rate of return (IRR) method B. net present value (N PV) C. discounted cash flow model D. future value methodarrow_forwardConsider the following cash flows and calculate IRR.arrow_forwardDefine the term reinvestment rate and describe how it differs for any cash flow series between (1) a PW value calculated at the MARR, and (2) the IROR value i*.arrow_forward
- How do youcalculate present and future value cash flows from various time periods using single and multiple payments?arrow_forwardPlease answer the following question. In this method, the company compares the amount spent on the investment with the discounted expected future cash inflows. a.Payback b.NRV c.Investment d.IRRarrow_forwardWhat adjustment is made to FCFE when calculating the terminal value in a Discounted Cash Flow (DCF) analysis?arrow_forward
- Define effective annual rate (EAR) with examples. Differentiate between annuity cash flows and mixed stream with examplearrow_forwardThere are four variables in the process of adjusting single cash flow amounts for the time value of money:present value (PV), future value (FV), i and n. If you know any three of these, the fourth can be computedeasilyarrow_forwardThe PW-criterion accounts for the time value of money by converting the cash flows to the period corresponding to the present by using the equations or functional notations Select one: True O Falsearrow_forward
- The rate of return that equates the present value of cash inflows and outflows is the: A. hurdle rate.B. desired rate of return.C. internal rate of return. D. minimum rate of return.arrow_forwarda. Calculate the IRR for each of the three cash-flow diagrams that follow. Use EOY zero for (i) and EOY four for (ii) and (ii) as the reference points in time. What can you conclude about "reference year shift" and "proportionality" issues of the IRR method?arrow_forwardThe discount rate to be used for calculating the present value of a stream of cash flow should be a)Bank rate b)Prime Lending Rate c)Treasury rate d)Opportunity costarrow_forward
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