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cfc session 7 ch8

# 47 certified financial controller cfc irr solution

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Unformatted text preview: ,720 + \$3,479 = \$36,841 36, [Rate is too high!!] 47 Certified Financial Controller CFC IRR Solution (Interpolate) 0.05 X 0.10 \$41,444 \$1,444 IRR \$40,000 0.15 \$36,841 X 0.05 48 = \$1,444 \$4,603 Certified Financial Controller CFC 24 \$4,603 IRR Solution (Interpolate) 0.05 X 0.10 \$41,444 \$1,444 IRR \$40,000 \$4,603 0.15 \$36,841 X 0.05 = 49 \$1,444 \$4,603 Certified Financial Controller CFC IRR Solution (Interpolate) 0.05 X 0.10 \$41,444 \$1,444 IRR \$40,000 \$4,603 0.15 \$36,841 X = (\$1,444)(0.05) \$4,603 X = 0.0157 IRR = 0.10 + 0.0157 = 0.1157 or 11.57% 50 Certified Financial Controller CFC 25 IRR Acceptance Criterion The management of Basket Wonders has determined that the hurdle rate is 13% for projects of this type. Should this project be accepted? No! The firm will receive 11.57% for Th fi 11 each dollar invested in this project at a cost of 13%. [ IRR < Hurdle Rate ] 51 Certified Financial Controller CFC IRR Strengths and Weaknesses Strengths: • Accounts for TVM • Considers all cash flows fl • Less subjectivity 52 Weaknesses: • Assumes all cash flows reinvested at the IRR • Difficulties with project rankings and Multiple IRRs Certified Financial Controller CFC 26 Net Present Value (NPV) NPV is the present value of an is the present value of an investment project’s net cash flows minus the proje...
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