Chapter_10_11.docx - CHAPTER 10 1 They are essentially the...

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CHAPTER 101.They are essentially the same thing, they both tell the effective rate of return. They tell which rate of return in which initial outflow equals future inflow. ST-1 a. Payback period Project X=2+500/3000=2.17 YearsPayback period Project y=2+3000/3400=2.86 yearsNPV Project X=2325.78NPV Project Y=2410.83IRR Project X=18.03%IRR Project Y=14.96%MIRR Project X=1.035764845-1=3.56%MIRR Project Y=1.108254434-1=10.82%b. NPV is the best overall. NPV is positive for both projects.c. NPV of project Y is higher so it should be accepted.d.If IRR and cost of capital are the same then the conflict will arise.10-19000*(1-1/(*1+.11))/.11-40000=2409.7710-2 Excel formula=12.84%10-3 MIRR=11.93%10-4 PI=1+2409.7/40000=1.0610-5 PB period=Initial cash flow/annual net cash inflow=40000/9000=4.44 years10-6 PV=-40000, FV=0, PMT=9000 N=?=6.43=DPB, I/Y=11%10-7 5%NPVA=-15000000+5000000/1.05+10000000/1.05^2+20000000/1.05^3=16108951.5171NPVB=-150000000+20000000/1.05+10000000/1.05^2+6000000/1.05^3=18300939.423410%NPVA=-15000000+5000000/1.10+10000000/1.10^2+20000000/1.10^3=12836213.3734NPVB=-15000000+200000000/1.10+10000000/1.10^2+6000000/1.10^3=15954169.797115%NPVA=-15000000+5000000/1.15+10000000/1.15^2+200000000/1.15^3=10059587.4086NPVB=-15000000+20000000/1.15+10000000/1.15^2+6000000/1.15^3=13897838.4154b. IRR Project A=43.97%
IRR Project B=82.03%10-8 Plugged into ExcelIRR Project Truck IRR=14.99%, Accept the decision because IRR is less than the cost of capital.IRR Project Pulley IRR=20.00%,Accept because IRR greater than the cost of capital. NPV Project Truck= 408.71, Accept because NPV is positive.NPV Project Pulley=3318.11, accept because the NPV is positive.MIRR Project Truck=14.54%, accept because MIRR is greater than the cost of capital.

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