Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 22, Problem 26P
a.
Summary Introduction
To determine: The
Introduction:
Net present value (NPV):
The net present value (NPV) is the distinction between the present value of
b.
Summary Introduction
To determine: The net present value (NPV) of waiting and investing tomorrow.
c.
Summary Introduction
To verify: The hurdle rate rule of the thumb gives the correct time to invest if the annual cash flow is $80,000.
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In a few sentences, answer the following question as completely as you can.
The notion that money has time value is based on the existence of a non–zero opportunity rate (i.e., a rate of return at which it is possible to invest). Why is the opportunity rate so important? Construct an example that shows, with an opportunity rate of 0%, that the value of $1 received today will be $1 in the future.
6.Calculate the project's Modified Internal Rate of Return (MIRR). What critical assumption does the MIRR make that differentiates it from the IRR?
TIP : look for the definition of Modified Internal Rate of Return, and then do it in excel, easy !!!
Year
Net Cash flow
Future Value of Net Cash flow
0
-$20.8
example
1
$4.5
$7.97 (n=6, i=10%)=fv(.1,6,,4.5)
2
$6.3
(n=5, i=10%)
3
$5.2
(n=4, i=10%)
4
$3.9
(n=3, i=10%)
5
$2.1
(n=2, i=10%)
6
$1.3
(n=1, i=10%)
7
$0.5
(n=0, i=10%)
Sum = $XX.XX
MIRR = ( in excel ) Rate ( 7,-20.8, xx.xx)
7.Where does the value of MIRR fall relative to the discount rate and IRR?
What would be the interest rate that would allow you to convert an investment from B/.5,000 to B/.20,227.79 in 10 years? (NOTE: Do this problem ONLY with Conversion Factor and the corresponding Excel Financial Function and remember to confirm your answer with the corresponding Cash Flow Table)
Chapter 22 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 22.1 - What is the difference between a real option and a...Ch. 22.1 - Why does a real option add value to an investment...Ch. 22.2 - Prob. 1CCCh. 22.2 - In what circumstances does the real option add...Ch. 22.2 - How do you use a decision tree to make the best...Ch. 22.3 - What is the economic trade-off between investing...Ch. 22.3 - Prob. 2CCCh. 22.3 - Does an option to invest have the same beta as the...Ch. 22.4 - Why can a firm with no ongoing projects, and...Ch. 22.4 - Why is it sometimes optimal to invest in stages?
Ch. 22.4 - How can an abandonment option add value to a...Ch. 22.5 - Prob. 1CCCh. 22.5 - Prob. 2CCCh. 22.6 - Why can staging investment decisions add value?Ch. 22.6 - How can you decide the order of investment in a...Ch. 22.7 - Prob. 1CCCh. 22.7 - Prob. 2CCCh. 22 - Your company is planning on opening an office in...Ch. 22 - You are trying to decide whether to make an...Ch. 22 - Prob. 4PCh. 22 - Prob. 5PCh. 22 - You are a financial analyst at Global Conglomerate...Ch. 22 - Prob. 7PCh. 22 - Prob. 8PCh. 22 - Consider again the electric car dealership in...Ch. 22 - Prob. 12PCh. 22 - Prob. 13PCh. 22 - You are an analyst working for Goldman Sachs, and...Ch. 22 - You own a small networking startup. You have just...Ch. 22 - An original silver dollar from the late eighteenth...Ch. 22 - What implicit assumption is made when managers use...Ch. 22 - Prob. 22PCh. 22 - Genenco is developing a new drug that will slow...Ch. 22 - Prob. 24PCh. 22 - Your firm is thinking of expanding. If you invest...Ch. 22 - Prob. 26PCh. 22 - Assume that the project in Example 22.5 pays an...
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Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License