A project that will provde annual cash flows of $2,650 for nine years costs $10,900 today. a. At a required return of 8 percent, what is the NPV of
View the step-by-step solution to:

Question

A project that will provde annual cash flows of $2,650 for nine years costs $10,900

today. 

 a.At a required return of 8 percent, what is the NPV of the project? =  5654.25

b.At a required return of 24 percent, what is the NPV of the project? = -1451.42

c.At what discount rate would you be indifferent between accepting the project and rejecting it?


Piercy, LLC, has identified the following two mutually exclusive projects: YearCash Flow (A)Cash Flow (B)0 −$53,000  −$53,000 1  29,000   16,700 2  23,000   20,700 3  17,500   25,000 4  12,600   25,700  

 a-1.What is the IRR for each of these projects? 

a-2.If you apply the IRR decision rule, which project should the company accept? Project A

b-1.Assume the required return is 13 percent. What is the NPV for each of these projects? 

b-2.Which project will you choose of you apply the NPV decision rule? Procject B

c-1.Over what range of discount rates would you choose Project A?

 c-2.Over what range of discount rates would you choose Project B? 

d.At what discount rate would you be indifferent between these two projects?



Consider the following cash flows: YearCash Flow

0−$29,600     

1-14,100     

2-14,800    

3-11,200       

a.What is the profitability index for the cash flows if the relevant discount rate is 11 percent? 

b.What is the profitability index if the discount rate is 16 percent? 

c.What is the profitability index if the discount rate is 23 percent?



Consider the following two mutually exclusive projects:  The required return on these investments is 10 percent.

Cash Flow A

0,-420000

1,46500

2,59500

3,76500

4,535000


Cash flow B

0,-37500

1,19900

2,13800

3,16100

4,12900

 a.What is the payback period for each project? 

b.What is the NPV for each project? 

c.What is the IRR for each project? 

d.What is the profitability index for each project? 

e.Based on your answers in (a) through (d), which project will you finally choose?



Doak Corp. is evaluating a project with the following cash flows: 

Year Cash Flow

0  -$15,300  

1   6,400  

2   7,600 

3   7,200 

4   6,000  

5  -3,400   

The company uses an interest rate of 9 percent on all of its projects. Calculate the MIRR of the project using all three methods.


Discount approch=

reinvestment approch=

combination approch=

Top Answer

View the full answer
NPV,MIRR,Payback-page0001.jpg

SOLUTION NPV is already calculated by you. So Iwill try to solve answers which are not given. C)
requires the discount rate at which we would be indifferent between accepting the project and...

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question