The following table shows the forecast cash flows for two projects: C0 C1 C2 C3 C4 C5 A -$1,050 $25 $ 25 $25 $25 $1,240 B -1,050 65 65 1,075 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 rt 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: C0 C1 C2 C3 C4 C5 A -$1,050 $25 $ 25 $25 $25 $1,240 B -1,050 65 65 1,075 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 rt 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?
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter7: Corporate Valuation And Stock Valuation
Section: Chapter Questions
Problem 25SP: Start with the partial model in the file Ch07 P25 Build a Model.xlsx on the textbook’s Web site....
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