Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Net Cash Flows and NPVs for different discount rate for projects S and L are given below
|
Net Cash Flows ($) |
|
Discount Rate (%) |
NPVS |
NPVL |
|
Year (t) |
Project S |
Project L |
|
0% |
$800 |
$1100 |
0 |
$(3000) |
$(3000) |
|
5 |
|
554.32 |
1 |
1500 |
400 |
|
10 |
161.33 |
|
2 |
1200 |
900 |
|
15 |
(90.74) |
(259.24) |
3 |
800 |
1300 |
|
20 |
(309.03) |
(565.97) |
4 |
300 |
1500 |
|
|
|
|
- e) What is the
IRR for L? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR
Equation:
Answer:
- f) What is the cross-over rate? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR
Equation:
ANSMER:
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- Net Cash Flows and NPVs for different discount rate for projects S and L are given below Net Cash Flows ($) Discount Rate (%) NPVS NPVL Year (t) Project S Project L 0% $800 $1100 0 $(3000) $(3000) 5 554.32 1 1500 400 10 161.33 2 1200 900 15 (90.74) (259.24) 3 800 1300 20 (309.03) (565.97) 4 300 1500 a) Calculate the payback period in years for the Project S and Project L i) Payback for Project S: ii) Payback for Project L: c) Calculate NPVS for 5% and NPVL for 10%. Fill the table i) NPVS at 5%: ii) NPVS at 10%: d) What is the IRR for S? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR Equation: Answer: e) What is the IRR for S? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR Equation: Answer: f) What is the cross-over rate? (Write down the equation for IRR and then Use…arrow_forwardPls show complete steps thanks. Show all parts or skiparrow_forwardProject A has the following estimated cash flows and present values:Year Cash flow $ Discount factor@ 12% Present value $0 Cost (95 000) 1.0 (95 000) 1–5 Contributionper annum 50 000 3.605 180 250 1–5 Fixed costsper annum (25 000) 3.605 (90 125) 5 Residual value 20 000 0.567 11 340 The benefit of using sensitivity analysis in an investment appraisal would be:arrow_forward
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