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Chapter 5 readings+practice

Chapter 5 readings+practice - Chapter 5 readings All...

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Unformatted text preview: Chapter 5 readings: All sections, but the first paragraph on page 141 (about project balances and trial ERRs) is difficult to follow, and is not covered in this course. For this course, the ERR calculation is done as described in points numbered 1, 2, 3 and 4 on page 141. Suggested Practice Questions (note that numerical answers are in Appendix D of text, p. 566): ‐ starting on p. 154, try problems 5.1a, 5.3, 5.11, 5.13, 5.15, 5.21c, 5.23a&b, 5.25, 5.31 Note that most of the suggested problems ask you to calculate one (or more) IRRs for the stated cash flow series; I suggest that you do two things: (1) write out the PW=0 equation that defines the IRR, using interest factor symbols (e.g., (P/A,i,N), etc.), and (2) calculate the solution to the equation using a spreadsheet. To use the spreadsheet for your calculation, enter the net cash flow series into a row of the spreadsheet, and use the Excel function “irr” to find the IRR. The first thing that I suggest (number (1) above) is good practice for the exams. The second thing (number (2) above) will prepare you for Assignment #2, in which I ask you to calculate an IRR, among other things. ...
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