Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year 0 Cash Flow -$ 27,800 1 11,800 -23 3 14,800 10,800 If the required return is 18 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR %arrow_forward6. You are choosing between two projects. The cash flows for the projects are given in the following Data table ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$48 $27 $19 $22 $15 B −$100 $22 $39 $48 $62 The IRR for project A is __________________________%. (Round to one decimal place.) The IRR for project B is____________________________%.(Round to one decimal place.) If your discount rate is 5.4%, the NPV for project A is $_______________million.(Round to two decimal places.) If your discount rate is 5.4%, the NPV for project B is $______________ million.(Round to two decimal places.) NPV and IRR rank the two projects differently because they are measuring different things. ___________________is measuring value creation, while ___________________is measuring return on investment. Because returns do not scale with different levels of investment, the two measures may give different rankings when…arrow_forwardThe following table contains the estimated cash flows of a project. Assume the appropriate discount rate (hurdle rate) is 14%. Answer the following questions: Year Operating Cash Flow 0 -$20,000 1 $7,000 2 $8,000 3 $9,000 4 $4,000 b. What is the NPV of project 1?arrow_forward
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