PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 12, Problem 13PS
Economic income* Consider the following project:
The internal rate of return is 20%. The NPV, assuming a 20%
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A project that costs $50 million is expected to generate $20 million per year over the next 4 years. The project's cost of capital is 6%. a) Find the payback period (PP).b) Find the net present value (NPV).c) Find the internal rate of return (IRR).d) Find the modified internal rate of return (MIRR).
consider a project lasting one year which costs x > 0 in year zero and generates a cash flow of y in year one. The project has an internal rate of return of 10%. this means that:
Consider the following information about a project:
Calculate the NPV assuming 10% discount rate
Determine in which year will be the payback
Calculate (ROI)?
Chapter 12 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 12 - Terminology Define the following: a. Agency costs...Ch. 12 - Prob. 2PSCh. 12 - Prob. 3PSCh. 12 - Prob. 4PSCh. 12 - Prob. 5PSCh. 12 - Prob. 6PSCh. 12 - Management compensation We noted that management...Ch. 12 - Prob. 8PSCh. 12 - Prob. 9PSCh. 12 - Prob. 10PS
Ch. 12 - Prob. 11PSCh. 12 - Economic income Fill in the blanks: A projects...Ch. 12 - Economic income Consider the following project:...Ch. 12 - Accounting measures of performance Use the Beyond...Ch. 12 - Accounting measures of performance The Modern...Ch. 12 - Prob. 17PSCh. 12 - EVA Here are several questions about economic...Ch. 12 - EVA Herbal Resources is a small but profitable...Ch. 12 - Prob. 20PSCh. 12 - EVA Use the Beyond the Page feature to access the...Ch. 12 - EVA Ohio Building Products (OBP) is considering...
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- Using a MARR of 12%, find the external rate of return (ERR) for the following cash flow. Is this project economically attractive?arrow_forwardA project is projected to have the following net income: Year 1 = $80,000; Year 2 = $40,000; Year 3 = –$30,000. The same project has an initial investment of $300,000 and will lose value at a rate of $100,000 per year. The numerator in the average accounting return method will be?arrow_forwardIllustration: An investment opportunity costs $10,000 and returns $5,000, $4,000, and $3,000, respectively, the first three years. What is the internal rate of return (IRR)?arrow_forward
- Suppose a project with a 6% discount rate yields R5000 for the next three years. Annual operating costs amount to R1000 for each year, and the one time initial investment cost is R8000. a. Calculate the Net Present Value (NPV) of this project.b. Calculate the cost-benefit ratio for the project. c. Is the project acceptable? Motivate your answer.arrow_forwardFind the present worth at time 0 of the chrome plating costs shown in the cash flow diagram. Assume i = 10% per year.arrow_forwardCalculate the Rate of Return of the project. Explain, how and why? Rate of interest = 10%arrow_forward
- Suppose that a project requires an initial investment of 20 000 USD at the begynning of year 1. The project is expected to return 25 000 USD at the end of year 1. The required rate of return for the project is 20%. Calcualte the Net Present Value of the project as well as the Internal Rate of Return.arrow_forwardConsider the following sets of investment projects: Compute the equivalent annual worth of each project at i = 10%, and determine the acceptability of each project.arrow_forwardUse the ERR method to evaluate the economic worth of the diagram shown below. The value of the external reinvestment rate, ∈, is 8% per year. The MARR = 10% per year.arrow_forward
- An investment project has expected cash flows as shown below. The required rate of return for the project is 11.8%. What is the project's net present value (NPV)? Assume that the cash flows after year 0 occur at the end of each year. Year 0 cash flow= -91,000 Year 1 cash flow=21,000 Year 2 cash flow= 40,000 Year 3 cash flow= 43,000 Year 4 cash flow= 55,000 Year 5 cash flow= 19,000arrow_forwardExplain how the internal rate of return and net present value are related. If a project has an NPV of $50,000 using a 10 percent discount factor, what does this imply about that project's IRR?arrow_forwardAssume that it costs $1,000 to start a project. If the project will give $400 profit in the first year, $500 in the second year and $300 in the third year. find the payback period. Now assume that the interest rate is 10%, find the net present value (NPV) and the profitability index (PI) for this projectarrow_forward
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