Finance Final Answers

Finance Final Answers - NPV and IRR #9 . A firm is...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
NPV and IRR Answer: e #9 i . A firm is analyzing two mutually exclusive projects with the following cash flows: Project A Project B Year Cash Flow Cash Flow 0 -$50,000 -$30,000 1 10,000 6,000 2 15,000 12,000 3 40,000 18,000 4 20,000 12,000 If the company’s WACC is 10%, what is the NPV of the project with the highest IRR? a. $ 7,090 b. $ 8,360 c. $11,450 d. $12,510 e. $15,200
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
i . NPV and IRR Answer: e Financial calculator solution: Project A: Inputs: CF 0 = -50000; CF 1 = 10000; CF 2 = 15000; CF 3 = 40000; CF 4 = 20000; I/YR = 10. Outputs: NPV = $15,200.46 ≈ $15,200; IRR = 21.38%. Project B: Inputs: CF 0 = -30000; CF 1 = 6000; CF 2 = 12000; CF 3 = 18000; CF 4 = 12000; I/YR = 10. Outputs: NPV = $7,091.73 ≈ $7,092; IRR = 19.28%. Project A has the highest IRR, so the answer is $15,200. IRR Answer: c #7 # . An insurance firm agrees to pay you $3,310 at the end of 20 years if you pay premiums of $100 per year at the end of each year for 20 years. Find the internal rate of return to the nearest whole percentage point. a. 9%
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Finance Final Answers - NPV and IRR #9 . A firm is...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online