CORP FIN (LL)+CONNECT+PROCTORIO+180
12th Edition
ISBN: 9781266120343
Author: Ross
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 22QAP
Summary Introduction
Introduction: The term
To calculate: IRR of the project along with the discount rate at which NPV is maximum and approach to determine the maximum NPV.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
You are evaluating a project that costs $75,000 today. The project has an inflow of $160,000 in one year and an outflow of $65,000 in two years.
What are the IRRs for the project?
What discount rate results in the maximum NPV for this project?
You are evaluating a project that costs $75,000 today. The project has an inflow of $
155,000 in one year and an outflow of $65,000 in two years. What are the IRRs for the
project? What discount rate results in the maximum NPV for this project? How can you
determine that this is the maximum NPV?
Suppose you are considering a project has an initial cost of $500 that has an ongoing benefit of $250. Further, there is an ongoing
cost that is equal to $90, which increases by 10% each year (compounding). Assume the project lasts 6 years.
If the appropriate discount rate is 6%. Calculate:
a) the Net Present Value = $Blank 1
b) the Benefit Cost Ratio = Blank 2
c) should the project be accepted or rejected? Explain your answer using the information from part a) and b). Answer =Blank 3
(accept/reject)
Provide your answers to two decimal places. Do not include any commas (,) "$" or "%" in your answers. Ensure you show all your
working in your spreadsheet.
Chapter 5 Solutions
CORP FIN (LL)+CONNECT+PROCTORIO+180
Ch. 5 - Payback Period and Net Present Value If a project...Ch. 5 - Net Present Value Suppose a project has...Ch. 5 - Comparing Investment Criteria Define each of the...Ch. 5 - Payback and Internal Rate of Return A project has...Ch. 5 - Prob. 5CQCh. 5 - Capital Budgeting Problems What are some of the...Ch. 5 - Prob. 7CQCh. 5 - Prob. 8CQCh. 5 - Net Present Value versus Profitability Index...Ch. 5 - Internal Rate of Return Projects A and B have the...
Ch. 5 - Net Present Value You are evaluating Project A and...Ch. 5 - Modified Internal Rate of Return One of the less...Ch. 5 - Net Present Value It is sometimes stated that the...Ch. 5 - Prob. 14CQCh. 5 - Prob. 1QAPCh. 5 - Prob. 2QAPCh. 5 - Prob. 3QAPCh. 5 - Prob. 4QAPCh. 5 - Prob. 5QAPCh. 5 - Prob. 6QAPCh. 5 - Prob. 7QAPCh. 5 - Prob. 8QAPCh. 5 - Prob. 9QAPCh. 5 - Prob. 10QAPCh. 5 - NPV versus IRR Consider the following cash flows...Ch. 5 - Prob. 12QAPCh. 5 - Prob. 13QAPCh. 5 - Prob. 14QAPCh. 5 - Prob. 15QAPCh. 5 - Comparing Investment Criteria Consider the...Ch. 5 - Prob. 17QAPCh. 5 - Comparing Investment Criteria Consider the...Ch. 5 - Prob. 19QAPCh. 5 - Prob. 20QAPCh. 5 - MIRR Suppose the company in the previous problem...Ch. 5 - Prob. 22QAPCh. 5 - Prob. 23QAPCh. 5 - Prob. 24QAPCh. 5 - Prob. 25QAPCh. 5 - Prob. 26QAPCh. 5 - Prob. 27QAPCh. 5 - Prob. 28QAPCh. 5 - Prob. 29QAPCh. 5 - Prob. 30QAPCh. 5 - Construct a spreadsheet to calculate the payback...Ch. 5 - Based on your analysis, should the company open...Ch. 5 - Prob. 3MC
Knowledge Booster
Similar questions
- Suppose a project with a 6% discount rate yields R5000 for the next three years. Annual operating costs amount to R1000 for each year, and the one time initial investment cost is R8000. a. Calculate the Net Present Value (NPV) of this project.b. Calculate the cost-benefit ratio for the project. c. Is the project acceptable? Motivate your answer.arrow_forwardSuppose you are considering a project has an initial cost of $600 that has an ongoing benefit of $ 250. Further, there is an ongoing cost that is equal to $90, which increases by 10% each year ( compounding). Assume the project lasts 6 years. If the appropriate discount rate is 6%. Calculate: a) the Net Present Value = $ Blank 1 b) the Benefit Cost Ratio Blank 2 c) should the project be accepted or rejected? Explain your answer using the information from part a) and b). Answer = Blank 3 (accept/reject) provide your answers to two decimal places. Do not include any commas (,) "$" or "%" in your answers. Ensure you show all your working in your spreadsheet. (best show with excel)arrow_forwardAssume that it costs $1000 to start a project. If the project will give $400 profit in the first year, $500 in the second year and $300 in the third year. Find the pay back period. Now assume that the interest rate is 10%, find the net present value (NPV) and the profitability index (PI) for this projectarrow_forward
- Assume that it costs $1,000 to start a project. If the project will give $400 profit in the first year, $500 in the second year and $300 in the third year. find the payback period. Now assume that the interest rate is 10%, find the net present value (NPV) and the profitability index (PI) for this projectarrow_forwardA project will cost $20,000 today and yield cash inflows of $15,000 and $25,000 at the end of Year 1 and Year 2, respectively. At the end of Year 3, the project will require an additional clean-up cost of $5,000. The required rate of return for similar projects is 10%. What is the MIRR of this project if we use the discounting approach? Select one: a. 61.80% b. 48.03% c. 38.90% d. 26.67% e. 24.32%arrow_forward(Paybackperiod, NPV, PI, and IRR calculations) You are considering a project with an initial cash outlay of $80,000 and expected free cash flows of $26,000 at the end of each year for 6 years. The required rate of return for this project is 7 percent. a. What is the project's payback period? b. What is the project's NPV? c. What is the project's PI? d. What is the project's IRR?arrow_forward
- 1. A cost-benefit analysis of a new irrigation project indicates that the net benefits (B C) of the project in each of the first four years will be $2 million. Thereafter, the project will yield positive net benefits of $750,000 for the next 20 years. Calculate the present valueof benefits minus costs when the social rate of discount is 10 percent. You can use spreadsheet software to do this calculation. Does the program merit approval? How would the present value of the net benefits change if the social rate of discount were 15 percent?arrow_forwardPlease somebody help me for my assignment lesson in NPV. A project costing $150,000 has following expected benefits: Year 1 $70,000 Year 2 $70,000 Year 3 $ 80,000 Year 4 $60,000 Year 5 $40,000. What is the payback period of the project? And what is the NPV of the project if the discount rate is 10%?arrow_forward2. A potential software project will cost $17000 now, $2000 one year from now, $1000 2 years from now, and $1000 3 years from now. It will provide benefits of $28000 after it is installed 1 year from now, $30000 2 years from now, and $35000 3 years from now. Calculate the Present Value of the costs and benefits for each year and the overall Net Present Value of the project. Use a discount rate of 3%. (Hint: set up a spreadsheet...) Year 0 SO ? Benefits PV of Benefits Costs PV of Costs ? $17,000 Year 1 $28,000 ? Show Transcribed Text $2,000 ? Year 2 $30,000 ? $1,000 ? Year 3 $35,000 ? $1,000 ? Net Present Value (NPV) = Total PV of Benefits - Total PV of Costs Total Benefits Total Costs 3. The Payback Period is the length of time required to recover the cost of an investment. Management uses Payback Period to assess the risk of an investment - the longer the Payback Period, the higher the investment risk. What is the Payback Period for the project in question #2 above? 4. What is the ROI…arrow_forward
- could you help with this homework question? The project you manage require $10,000 in capital outlay, $30,000 in equipment, and $10,000 in training during the first year. Each subsequent year will incur additional labor cost of $5,000 per year, reduce material costs by $15,000, and increase revenue by $20,000 per year. Assume NPV is discounted by 5%. Please include your formula for the payback method conduct a cost-benefit analysis using the payback method and the net present value method forarrow_forwardYou are considering a project that costs $30 and has expected cash flows of $11.00, $12.10, and $13.31 over the next three years. If the appropriate discount rate for the project's cash flows is 10%, what is the net present value of this project? Select one: a. $19.79 b. $64.10 c. The NPV is negative d. $0.00 e. $0.71arrow_forwardExplain how the internal rate of return and net present value are related. If a project has an NPV of $50,000 using a 10 percent discount factor, what does this imply about that project's IRR?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College