This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: = = = = =m and therefore, IRR 1 = x 1 – 1 = 10%, and IRR 2 = x 2 – 1 = 20%. H OMEWORK Q UESTIONS : 1. Suppose we are given that C = –$1 million; C 1 = $6 million; and C 2 = –$6.75 million. Work out the two solutions for the IRR. We are given that a = –1, b = 6, and c = –6.75. Therefore, b 2 – 4 ac = 9, and x 1 = 1.5, and x 2 = 4.5, which in turn leads to IRR 1 = 50%, and IRR 2 = 350%. These are shown in the graph below: 2. Suppose we are given that C = –$20 million; C 1 = $48 million; and C 2 = –$28.4875 million. Work out the two solutions for the IRR. We are given that a = –20, b = 48, and c = –28.4875. Therefore, b 2 – 4 ac = 25, and x 1 = 1.075, and x 2 = 1.325, which in turn leads to IRR 1 = 7.5%, and IRR 2 = 32.5%. These are shown in the graph below: Solution to Homework 6 Solution to Homework 6...
View
Full Document
 Spring '10
 CHOW
 Net Present Value, Quadratic equation, Internal rate of return, HAAS SCHOOL OF BUSINESS, Avinash Verma

Click to edit the document details