How is the irr on a project related to the ytm on a

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Intermediate Financial Management
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Chapter 12 / Exercise 12-4
Intermediate Financial Management
Brigham/Daves
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(2) How is the IRR on a project related to the YTM on a bond?
(3) What is the logic behind the IRR method? According to IRR, which project(s) should be accepted if they are independent? Mutually exclusive?
(4) Would the projects’ IRRs change if the WACC changed?
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Intermediate Financial Management
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Chapter 12 / Exercise 12-4
Intermediate Financial Management
Brigham/Daves
Expert Verified
e.(1) Draw NPV profiles for Project’s L and S. At what discount rate do the profiles cross?
(2) Look at your NPV profile graph without referring to the actual NPVs and IRRs. Which project(s) should be accepted if they are independent? Mutually exclusive? Explain. Are your answers correct at any WACC less than 23.6%?

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