Review_Session_-_Assignment_3

Review_Session_-_Assignment_3 - Also you did something...

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Assignment #3 Review Sheet 1. After finding a graph, make sure to specify what the news was, when it occurred and how the graph is semi-strong efficient or not. 2. If you are not sure of what scenarios are consistent with semi-strong market efficiency, you can refer to Lecture #12 or look it up in your book. 3.(a) The payback period is the period over which the cash flows you receive equal the initial cost of the project. Once you determine the length of the payback period, apply the decision rule to decide whether to accept the project. 3.(b) The NPV can be found by finding the PV of each cash flow and summing them up. If you are unsure on how to find the NPV of a perpetuity look it up in your book. The section on perpetuities goes over it.
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Unformatted text preview: Also, you did something similar to this on Assignment 1. 4. You can find the IRR by using the IRR function in Excel (=IRR). Another way to do this is to set up the NPV equation, set it equal to zero and solve for r by trial and error. Once you have the IRR, apply the decision rule for IRR to see if you accept the project. 5.(a) You can find the NPV by using the PV function in Excel and then subtracting C0. Then apply the NPV decision rule. 5.(b) You can find this by using trial and error with the PV function (=PV), that is by trying different discount rates until your answer is close to zero, or by finding the IRR, which is the highest rate at which the project should be accepted....
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