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4 6,750 =NPV(B51,C62:F62)+B62 4 4,115,899 or this is that all such projects add o evaluate two mutually exclusive ve NPV). Hence, if considering the ct L if they are mutually exclusive. flows to its outflows. In other tedious, but Excel provides an IRR ect S and L are shown below, along F G H 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95
4 6,750 capital. Strict adherence to the IRR example, each project has an IRR that re mutually exclusive, we would choose e have a conflict between the NPV and F G H 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116
ns in the cash flows to have more than age. The HP-10B says "Error - Soln", roblem is to store in a guess for the IRR, you should be able to find the other hundred percent). ted to form the graph shown above. , there are two IRRs. F G H 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162
hat cash flows only can be reinvested al the present value of the project's mpounded at the project's cost of t equates the two. Alternatively, you e reinvested at the cost of capital, ct's profitability. Moreover, it enerally, MIRR is defined as ur at a different rate than WACC. d at the cost of capital whereas the tment rate will be the cost of capital s assume reinvestment at the WACC al and added to the Year 0 cost to uld be discounted, and the positive F G H 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205
4 4,115,899 ### ### ### \$15,071,339 7.30% 7.30% 7.30% 4 6,750 12.66% 4 4,115,899 MIRR S = MIRR S = MIRR S = MIRR L = re 10-4, for the multiple IRR me = 0 cash flow and then positive F G H 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249
4 ### 6,750 ### y to find the crossover rate is to 20% F G H 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296
F G H 297 298
PV per dollar of investment. 30% tal C is to ct if ACC = ossover V L > F G H 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346
PV per dollar of investment. as the first formal method used to he initial cash outflows. That is the divided by the following year's cash lative CF turns positive, and e next year. However, it would be ity analysis for a given project, but Tutorial. We use the formula only F G H 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376 377 378 379 380 381 382 383 384 385
3 4 3,200,650 4,115,899 -2,237,208 1,878,691 - 3.54 mediate calculation: 386+ABS(E388/F387),"-") - 3 4 4,000 6,750 -2,000 4,750 3 4 ### ### ### ### ### ### 3 4 4,000.00 6,750.00 3,005.26 4,610.34 -3,606.31 1,004.03 e payback year, no matter how large oblem is addressed with the or both payback methods. Payback is between negative and positive cumulative cash flow. k is between and positive discounted cash flow. ayback is between negative and positive cumulative F G H 386 387 388 389 390 391 392 393 394 395 396 397 398 399 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431
r wealth. However, all methods and positive cumulative discounted cash flow.