Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:Consider the following:
Year Cash Flow
0 -$8,000
1
$200
2
$400
3
?
4
$500
5
$700
The required rate of return is 8%. Find the minimum amount you
would have to receive as a cash flow in year 3 and still
recommend the project. Answer to 2 decimals places.
8,349.32
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- A firm evaluates all of its projects by applying the IRR rule. Cash Flow Year 0 1 2 3 147,000 69,000 70,000 54,000 What is the project's IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal rate of return % If the required return is 16 percent, should the firm accept the project?arrow_forwardConsider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$350,000 −$35,000 1 25,000 17,000 2 70,000 11,000 3 70,000 17,000 4 430,000 11,000 Assume you require a 15 percent return on your investment and a payback of 4 years. a. If you apply the discounted payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? c. Based on your answers in (a) and (b), what you can say anything about the IRR of both projects? which project will you finally choose? Why?arrow_forwardManshukharrow_forward
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- Your required return is 15%. Should you accept a project with the following cash flows? Year 0 1 2 3 Cash Flow −$85 $40 $40 $35 Group of answer choices No, because the IRR is 13.92%. No, because the IRR is 14.73%. Yes, because the IRR is 16.21%. Yes, because the IRR is 17.19%.arrow_forwardI need help with H-1.arrow_forwardCan you please check my work it keeps showing I'm miarrow_forward
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