The following table shows the forecast cash flows for two projects: C₁ C4 C5 $28 $28 $1,264 74 A B It Co -$1,080 -1,080 Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the Following table: Req A1 C₂ $28 74 t IRRA IRRB 1 2 3 4.0% 4.5% 5.0% Req A2 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? $28 1,090 Complete this question by entering your answers in the tabs below. 4 5.5% 5.20 % % 5 6.0% Req A3 Calculate the IRR on the two projects. Note: Do not round intermediate calculations. Round your answers to 2 decimal places.

The following table shows the forecast cash flows for two projects: C₁ C4 C5 $28 $28 $1,264 74 A B It Co -$1,080 -1,080 Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the Following table: Req A1 C₂ $28 74 t IRRA IRRB 1 2 3 4.0% 4.5% 5.0% Req A2 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? $28 1,090 Complete this question by entering your answers in the tabs below. 4 5.5% 5.20 % % 5 6.0% Req A3 Calculate the IRR on the two projects. Note: Do not round intermediate calculations. Round your answers to 2 decimal places.

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

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The following table shows the forecast cash flows for two projects: C0C0 C1C1 C2C2 C3C3 C4C4 C5C5 A −$1,100 $30 $30 $30 $30 $1,280 B −1,100 80 80 1,100 Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the following table: t 1 2 3 4 5 rtrt 4.0% 4.5% 5.0% 5.5% 6.0% 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?
The following table shows the forecast cash flows for two projects: C₁ C3 C4 C5 $21 $1,208 $21 53 A B Co -$1,010 -1,010 It Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the following table: 1 4.0% 2 4.5% C₂ $21 53 t 3 5.0% $21 1,055 4 5.5% 5 6.0% 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?
Consider the investment project with net cash flows shown. There are 2 rates of return for the project. One is 43.47%. What is the other? Enter as a percentage without the percent sign. For instance, if your answer is 10.23%, enter as 10.23. n Net Cash Flow 0 -$8000 1 $10000 2 $30000 3 -$40000
Consider projects A and B with the following cash flows: Ce $32 57 $16 +$16 + 32 +$ 16 32 a-1. What is the NPV of each project if the discount rate is 12%? (Do not round intermediate calculations. Round your answers to 2 decimal places.) 6-2. Which project has the higher NPV? b-1. What is the profitability Index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b-2. Which project has the higher profitablity index? c. Which project is most attractive to a firm that can ralse an unlimited amount of funds to pay for its investment projects? d. Which project is most attractive to a firm that is limited in the funds it can ralse? ok nt mces Project A Project B a-1. NPV of ench project if the discount rate is 12% a-2. Which project has the higher NPV? b-1. Profitability index of each projoct b-2. Which project has the higher protitability index? Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for…
Project Y has following cash flows: C0 = -800, C1 = +6,000, and C2 = -6,000. Calculate the IRRs for the project: For what range of discount rates does the project have positive NPV (Plot a graph with NPV on the vertical axis and discount rate on the horizontal axis).
Consider the following cash flows: C0=-$42 C1=+$38 C2=+$38 C3=+$38 C4=-$76 a. Which two of the following rates are the IRRs of this project? 2.5% 7.8% 14.3% 32.5% 40.0% b. What is project NPV if the discount rates are 5%, 20%, 40%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 3 decimal places.)
Consider the following cash flows: C0=-$42 C1=+$38 C2=+$38 C3=+$38 C4=-$76 a. Which two of the following rates are the IRRs of this project? check all that apply 2.5% 7.8% 14.3% 32.5% 40.0% b. What is project NPV if the discount rates are 5%, 20%, 40%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 3 decimal places.)
A project is being analyzed with the following set of cash flows. Calculate the internal rate of return (IRR). (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Cash Year Flow 0 16,000 123 6,700 8,000 6,500 IRR %
For the given cash flows, suppose the firm uses the NPV decision rule.Year Cash Flow0 −$ 159,0001 57,0002 82,0003 66,000. a. At a required return of 8 percent, what is the NPV of the project. b. At a required return of 19 percent, what is the NPV of the project.
For the given cash flows, suppose the firm uses the NPV decision rule. Year Cash Flow 0 –$ 148,000 1 64,000 2 75,000 3 59,000 a. At a required return of 12 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. At a required return of 21 percent, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Consider the following cash flows: C0=-$42 C1=+$38 C2=+$38 C3=+$38 C4=-$76 a. Which two of the following rates are the IRRs of this project? (You may select more than one answer.) check all that apply 2.5% 7.8% 14.3% 32.5% 40.0% b. What is project NPV if the discount rates are 5%, 20%, 40%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 3 decimal places.)
Consider the following cash flow profile, and assume MARR is 11 percent/year. ΕΟΥ NCF $-115 1 $19 $19 3 $19 4 $19 5 $19 $19 a. What does Descartes' rule of signs tell you about the IRR(s) of the project? b. What does Norstrom's criterion tell us about the IRR(s) of this project? c. What is the IRR(s) for this project?

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