A project has a NPV of +60,000 dollars at the interest rate of 8%. A NPV of -30,000 dollars is realised at an interest rate of 10%. What is the IRR when calculated using the linear interpolation method? Select the best answer from the options listed below. 9.33% O b. 8.67% a. C. 9% d. 9.67%

A project has a NPV of +60,000 dollars at the interest rate of 8%. A NPV of -30,000 dollars is realised at an interest rate of 10%. What is the IRR when calculated using the linear interpolation method? Select the best answer from the options listed below. 9.33% O b. 8.67% a. C. 9% d. 9.67%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: Project B has an upfront cost of $45,000 and expected OCFs (already calculated) of $22,000 year 1,…

A: See above.

Q: If a project requires a $1000 initial investment, it returns $500 at the end of the first year, $600…

A: The objective of this question is to calculate the Modified Internal Rate of Return (MIRR) for a…

Q: An all-equity firm is considering the projects shown below. The T-bill rate is 5 percent and the…

A: The CAPM return represents the anticipated return on an investment and is derived from the CAPM…

Q: If you perform a NPV analysis on a perspective investment using a "d" = 15% and: a. the…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: ange of MARR values v MARR > 23.4% MARR = 33.3% %3D MARR > 44.2% MARR < 44.2% MARR < 23.4%

A: MARR represents the minimum attractive rate of return the company should earn.

Q: While discount rates are at 10% for every maturity, you,evaluate 2 investment projects with th…

A: YearCash flow of project ACash flow of project B0-$1,000.00-$600.001$700.00$400.002$900.00$600.00

Q: uppose you are offered a project with the following cash flows: ear Cash Flows 0 1 2 3 4 $8,800…

A: IRR is one method of capital budgeting based on the time value of money where net present value is…

Q: Consider two mutually exclusive projects with the following expected cash flows and a required rate…

A: The discounted payback period is used to measure the amount of time it takes the discounted cash…

Q: A project needs an initial investment of $100 and generates -$20 and $130 in year 1 and 2…

A: The modified internal rate of return is used in capital budgeting to evaluate the profitability of…

Q: A company has a 13% WACC and is considering two mutually exclusive investments (that cannot be…

A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: You are asked to investigate the three investment options shown in the table below for your firm…

A: Firms MIRR= 12% IRR of Project A = 15% IRR of Project B = 7% IRR of Project C = 10% It is evident…

Q: The five alternatives shown here are being evaluated by the rate of return method: If the…

A: Companies have different alternatives to invest their money in, but they should always compare the…

Q: The net present value of four projects is given below: Project W: $24,000 Project X: $ 11,000…

A: NPV is an important capital budgeting metric. It stands for net present value. It is the sum of…

Q: Evaluate the following investment project according to the Discounted Payback, Internal Rate of…

A: There are various techniques that are used by the management in order to determine whether to accept…

Q: If a project has a profitability index of 1.20, then the project's internal rate of return is O…

A: The profitability index is used to determine the attractiveness of an investment. It is computed by…

Q: Project 1 has a return, I, of 8.4% and Project 2 has a return rate, I, of 8.1%. The incremental rate…

A: Incremental return rate: It is an additional return that an investor earns when two projects are…

Q: Use NPV, GRR and PI analysis.

A: Capital budgeting is an investment appraisal method. This method evaluate the investment made in…

Q: Your firm uses the IRR method and asks you to evaluate the following mutually exclusive projects:…

A: Net Present Value = (Present Value of Cash Inflows - Present Value of Cash Outflows) Formula for…

Q: Compute the discounted payback statistic for project C if the appropriate cost of capital is 7% and…

A: Discounted Payback(PB) Period shows the time period in which present values(PV) of all cash inflows…

Q: ← Internal rate of return and modified internal rate of return. Quark Industries has three potential…

A: The given problem can be solved using IRR and MIRR function in excel.

Q: NPV Calculate the net present value (NPV) for a 30-year project with an initial investment of…

A: NPV is the sum of present value of future cashflows less initial investment

Q: An all-equity firm is considering the projects shown below. The T-bill rate is 5 percent and the…

A: The risk-free rate is 5% and Market Risk Premium is 9%.

Q: $1500 $1500 $1500 $1500 1 3 4 5 7 8. $500 $600 $700 $800 $900

A: While drawing a cash flow diagram under capital budgeting or a project management, cash outflows are…

Q: rate of return method. Incremental Rate of Return, % Initial Alternative Investment, $ versus DN, %…

A: Incremental rate of return also known as internal rate of return method. IRR is a discounting…

Q: Give typed solution only XYZ is considering a 3-yr project. The initial outlay is -$120,000, annual…

A: The net present value of a project increases if the annual expected cash flows of the project…

Q: Compute the (a) net present value, (b) internal rate of return (IRR), (c) modified internal rate…

A: Year Project AB Project LM Project UV 0 $-90,000.00 $ -1,00,000.00 $ -96,500.00 1 $…

Q: Iggy Company is considering three capital expenditure projects. Relevant data for the projects are…

A: Here, Depreciation Method is Straight Line Method.

Q: Five alternatives are being evaluated by the incremental rate of return method. Incremental Rate of…

A: The IRR (internal rate of return ) and the MARR (minimum acceptable rate of return) means the rates…

Q: What is the delta of a European put option with the following parameters? s0 = $40k = $47 r =…

A: Due to the mathematical complexity of directly calculating the delta for a European put option, we…

Q: A project that has a positive net present value discounted at a rate of 15% would have an internal…

A: A project that has a positive net present value discounted at a rate of 15% would have an internal…

Q: Calculate the net present value of the following project for discount rates of 10,20 and 40 percent.…

A: NPV is an important capital budgeting metric. NPV stands for net present value. Essentially NPV is…

Q: a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Project has the highest NPV and Project has the highest IRR.

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

Q: Assume that the net present value of a project is $ 3870 at 10%, and -$1853 at 12%. Use linear…

A: Making choices on long-term investments in projects and assets is aided by capital budgeting. These…

Q: Determinethe payback period for each b.Calculatethe net present value (NPV) for each…

A: Net present value is the difference between the present value of cash flow and initial investment of…

Q: You are asked to evaluate two projects X and Y. The cash flow for each is listed below. The…

A: Net present value (NPV) is the difference between the present value of cash inflows and cash…

Q: A firm evaluates all of its projects by applying the IRR rule. If the required return is 18 percent,…

A: Required return = 18% Year Cash flow 0 -30000 1 20000 2 14000 3 11000

Q: Valuation Problem Calculate NPV and IRR for the following investment. Initial investment =…

A: Net Present Value(NPV) will be ascertained by the excess cash inflows discounted at 12% over the…

Q: Compute the value of a real option using the following information: PV(project cash flows) = 51.6,…

A: A real option is a right but it is not the obligation to undertake certain business initiatives,…

Q: Consider the following two projects: Cash flows Project A Project B C0�0 −$ 240 −$ 240 C1�1 100 123…

A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…

Q: Find the PV and the FV of an investment that makes the following end-of-year payments. The…

Question

A project has a NPV of +60,000 dollars at the interest rate of 8%. A NPV of -30,000
dollars is realised at an interest rate of 10%. What is the IRR when calculated using
the linear interpolation method? Select the best answer from the options listed
below.
9.33%
b. 8.67%
9%
d. 9.67%
a.
C.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Explanation of the IRR of the project

VIEW

Step 2: Calculation of the IRR of the project

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

may i know the asnwer??
What is the delta of a European put option with the following parameters? s0 = $40k = $46 r = 10%sigma = 20%T = 0.75 years (required precision 0.01 +/- 0.01) Greeks Reference Guide: Delta = ∂π/∂S Theta = ∂π/∂t Gamma = (∂2π)/(∂S2) Vega = ∂π/∂σ Rho = ∂π/∂r
(c) Compute the annual rate of return for each project. (Hint: Use average annual net income in your computation.) (Round answers to 2 decimal places, e.g. 10.50%.) Annual rate of return Project Bono % Project Edge % Project Clayton %
Pronto Email service has a beta of 0.95 and a cost of equity of 11.9 percent. The risk-free rate of return is 2.8 percent. The firm is currently considering a project that has a beta of 1.03 and a project life of 6 years. What discount rate should be assigned to this project? a. 13.33% b. 13.84% c. 12.67% d. 13.62%
2
A project which requires an investment of OMR 18,000, duration of the project is 2 years, average net cash inflows were OMR 12,000 and annual variable cost is OMR 8,000. Assuming a discount rate at 12%, evaluate the sensitivity of Initial Investment influencing NPV with above information. Select one: O A. 11.25% B. 12.67% O C. 16.87% D. 6.75%
Just answer last question (what is npv for the project if the required rate of return is 26%)
What is Project A’s discounted payback? Use 5 decimal places for the PV factor
The following information is available on two mutually exclusive projects. Project Year 0 Year 1 Year 2 Year 3 Year 4 A -$700 $200 $300 $400 $500 B -$700 $600 $300 $200 $100 If the required rate of return is 10%, which project should be selected using the net present value (NPV) method? Group of answer choices A B
Assume a project has cash flows of -$54,300, $18,200, $37,300, and $14,300 for Years 0 to 3, respectively. What is the profitability index given a required return of 12.6 percent? 1.02 .95 .98 1.06 ☐ 1.00
The following information is available on two mutually exclusive projects. All numbers are in ‘000s. Project Year 0 Year 1 Year 2 Year 3 Year 4 A $700 $300 $300 $400 $400 B $700 $600 $300 $200 $100 a: If the minimum acceptable rate of return is 10%, which project should be selected using the Net Present Value (NPV) method? Which project should be selected if the Internal Rate of Return (IRR) method is used? b: At what cross‐over rate would the firm be indifferent between the two projects? What is the NPV for both projects at the crossover rate? c: How much should cash flow in year 3 for project B increase or decrease in order for NPV(B) to be equal to NPV(A)?
16. IRR/NPV. Consider the following project with an internal rate of return of 13.1%. (L08-2) Year 0 1 2 Cash Flow +$100 -60 -60 a. Should you accept or reject the project if the discount rate is 12%? b. What is project NPV?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS