The following table shows the forecast cash flows for two projects:C₁C3C4C5$21$1,208$2153ABCo-$1,010-1,010ItNow suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in thefollowing table:14.0%24.5%C₂$2153t35.0%$211,05545.5%56.0%a-1. Calculate the IRR on the two projects.a-2. Calculate the NPV on the two projects.a-3. Do the two measures give the same ranking for the two projects?

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Description: The following table shows the forecast cash flows for two projects:C₁C3C4C5$21$1,208$2153ABCo-$1,010-1,010ItNow suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in thefollowing table

Net present value is determined by deducting the current value of cash flows from the initial…

Answered: a-1. Calculate the IRR on the two…

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a-1. Calculate the IRR on the two projects. a-2. Calculate the NPV on the two projects. a-3. Do the two measures give the same ranking for the two projects?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section10.4: Internal Rate Of Return (irr)

Problem 2ST

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