Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 5, Problem 7PS
Capital rationing* Suppose you have the following investment opportunities, but only $90,000 available for investment. Which projects should you take?
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Capital budgeting problems and what king of you used for solving (NPV and IRR PROBLEMS )
A firm has the following investment alternative. Each one lasts a year
Investment A B C
Cach inflow $1,150 $560 $600
Cash outflow $1000 $500 $500
The firm's cost capital 7 percent. A and B are mutually exclusive, and B and C are mutually exclusive.
a. What is the net value of investment A? Investment B? investment C?
B. W hat is the internal rate on investment A? investment B? INvestment C?
c. Which invedstment(s) should the firm make? Why?
d. If the firm had unlimited sources of funds, which investments should it make? Why?
e. If there another alternative, investment D, with an internal rate of return of 6 percent, would that alter your anser to question (d)? why?
f. If the firm's cost of…
Capital budgeting problems and what king of you used for solving (NPV and IRR PROBLEMS )
A firm has the following investment alternative. Each one lasts a year
Investment A B C
Cach inflow $1,150 $560 $600
Cash outflow $1000 $500 $500
The firm's cost capital 7 percent. A and B are mutually exclusive, and B and C are mutually exclusive.
d. If the firm had unlimited sources of funds, which investments should it make? Why?
e. If there another alternative, investment D, with an internal rate of return of 6 percent, would that alter your anser to question (d)? why?
f. If the firm's cost of capital rose to 10 percent, what effect would that have on investment A's internal rate return?
(Ignore income taxes in this problem.) If an investment of $14,760 now will yield $18,000 at the end of one year, then the internal rate of return for this investment to the nearest whole percentage is:
Select one:
a.
14%
b.
18%
c.
22%
d.
28%
Chapter 5 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 5 - (IRR) Check the IRRs for project F in Section 5-3.Ch. 5 - (IRR) What is the IRR of a project with the...Ch. 5 - (XIRR) What is the IRR of a project with the...Ch. 5 - Payback a. What is the payback period on each of...Ch. 5 - IRR Write down the equation defining a projects...Ch. 5 - Prob. 3PSCh. 5 - IRR rule You have the chance to participate in a...Ch. 5 - IRR rule Consider a project with the following...Ch. 5 - IRR rule Consider projects Alpha and Beta: The...Ch. 5 - Capital rationing Suppose you have the following...
Ch. 5 - Payback Consider the following projects: a. If the...Ch. 5 - Prob. 9PSCh. 5 - IRR Calculate the IRR (or IRRs) for the following...Ch. 5 - IRR rule Consider the following two mutually...Ch. 5 - IRR rule Mr. Cyrus Clops, the president of Giant...Ch. 5 - Prob. 13PSCh. 5 - Profitability index Look again at projects D and E...Ch. 5 - Prob. 15PSCh. 5 - Prob. 16PS
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