FUND.ACCT.PRIN.
25th Edition
ISBN: 9781260247985
Author: Wild
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 26, Problem 22QS
To determine
Concept Introduction:
The project’s IRR.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Required information
[The following information applies to the questions displayed below.] A company is considering investing in a new machine that requires a cash payment of $50,939 today. The machine will generate annual cash flows of $21,208 for the next three years.
What is the internal rate of return if the company buys this machine? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Required information
[The following information applies to the questions displayed below.]
A company is considering investing in a new machine that requires a cash payment of $47,947 today. The machine will
generate annual cash flows of $21,000 for the next three years.
What is the internal rate of return if the company buys this machine? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate
factor(s) from the tables provided.)
Amount Invested
Internal Rate of Return
Annual Net Cash Flow
%
< Prev
Present Value Factor
5 of 5
HH
Next
G
O
1
Solve the following rate of return problems.
a. An investment of $1,700 today returns $64,000 in 50 years. What is the internal rate of return on this investment?
b. An investment costs $850,000 today and promises a single payment of $12.9 million in 22 years. What is the promised rate of
return, IRR, on this investment?
c. What return do you earn if you pay $24,410 for a stream of $4,000 payments lasting 10 years?
Note: Round your answers to 2 decimal places.
a. IRR
b. IRR
c. IRR
7.53 %
%
Chapter 26 Solutions
FUND.ACCT.PRIN.
Ch. 26 - Prob. 1QSCh. 26 - Prob. 2QSCh. 26 - Prob. 3QSCh. 26 - Prob. 4QSCh. 26 - Prob. 5QSCh. 26 - Prob. 6QSCh. 26 - Prob. 7QSCh. 26 - Prob. 8QSCh. 26 - Prob. 9QSCh. 26 - Prob. 10QS
Ch. 26 - Prob. 11QSCh. 26 - Prob. 12QSCh. 26 - Prob. 13QSCh. 26 - Prob. 14QSCh. 26 - Prob. 15QSCh. 26 - Prob. 16QSCh. 26 - Prob. 17QSCh. 26 - Prob. 18QSCh. 26 - Prob. 19QSCh. 26 - Prob. 20QSCh. 26 - Prob. 21QSCh. 26 - Prob. 22QSCh. 26 - Prob. 23QSCh. 26 - Prob. 24QSCh. 26 - Prob. 1ECh. 26 - Prob. 2ECh. 26 - Prob. 3ECh. 26 - Prob. 4ECh. 26 - Prob. 5ECh. 26 - Prob. 6ECh. 26 - Prob. 7ECh. 26 - Prob. 8ECh. 26 - Prob. 9ECh. 26 - Prob. 10ECh. 26 - Prob. 11ECh. 26 - Prob. 12ECh. 26 - Prob. 13ECh. 26 - Prob. 14ECh. 26 - Prob. 15ECh. 26 - Prob. 16ECh. 26 - Prob. 17ECh. 26 - Prob. 18ECh. 26 - Prob. 19ECh. 26 - Prob. 20ECh. 26 - Prob. 21ECh. 26 - Prob. 22ECh. 26 - Prob. 23ECh. 26 - Prob. 1PSACh. 26 - Prob. 2PSACh. 26 - Prob. 3PSACh. 26 - Prob. 4PSACh. 26 - Prob. 5PSACh. 26 - Prob. 6PSACh. 26 - Prob. 1PSBCh. 26 - Prob. 2PSBCh. 26 - Prob. 3PSBCh. 26 - Prob. 4PSBCh. 26 - Prob. 5PSBCh. 26 - Prob. 6PSBCh. 26 - Prob. 26SPCh. 26 - Prob. 1AACh. 26 - Prob. 2AACh. 26 - Prob. 3AACh. 26 - Prob. 1DQCh. 26 - Prob. 2DQCh. 26 - Prob. 3DQCh. 26 - Prob. 4DQCh. 26 - Prob. 5DQCh. 26 - Prob. 6DQCh. 26 - Prob. 7DQCh. 26 - Prob. 8DQCh. 26 - Prob. 9DQCh. 26 - Google managers must select depredation methods....Ch. 26 - Prob. 11DQCh. 26 - Prob. 12DQCh. 26 - Prob. 13DQCh. 26 - Prob. 1BTNCh. 26 - Prob. 2BTNCh. 26 - Prob. 3BTNCh. 26 - Prob. 4BTN
Knowledge Booster
Similar questions
- Question 1 Next Gen Corporation is considering two investment opportunities. The company can choose either to invest in Project K or Project M. The expected annual free cash flows for each project as follows: Year 0 1 2 3 4 5 Cash flows (RM) Project K Project M (7,000) (7,000) 1,800 (2,500) 1,800 4,800 0 0 0 0 3,800 10 000 If the required rate of return is 8%, calculate: 1. calculate the payback period for each project. 2. calculate the net present value for each project. 3. based on the two investment techniques, which project should be accepted?arrow_forwardopportunity costing P300,000 that is expected to yield the following cash flows over the next six years: Year One P75,000 Year Two P90,000 Year Three P115,000 Year Four P130,000 Year Five P100,000 Year Six P90,000 a. Find the payback period of the investment. b. Find the book rate of return of the investment. c. Find the NPV of the investment at a cutoff rate of 10%. *arrow_forwardNPV and maximum return A firm can purchase new equipment for $17,000 that generates an annual cash inflow of $4,000 for 8 years. a. Determine the net present value (NPV) of the asset, assuming that the firm has a cost of capital of 9%. Is the project acceptable? b. Determine the maximum required rate of return that the firm can have and still accept the asset. a. The net present value (NPV) of the new equipment is $ (Round to the nearest cent.) Based on its NPV, is the new equipment acceptable? (Select the best answer below.) O Yes No b. The maximum required rate of return the firm can have and still accept the new equipment is %. (Round to two decimal places.)arrow_forward
- K All techniques Rieger International is evaluating the feasibility of investing $87,000 in a piece of equipment that has a 5-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following table: The firm has a cost of capital of 8%. a. Calculate the payback period for the proposed investment. b. Calculate the discounted payback period for the proposed investment. c. Calculate the net present value (NPV) for the proposed investment. d. Calculate the probability index for the proposed investment. e. Calculate the internal rate of return (IRR) for the proposed investment. f. Calculate the modified internal rate of return (MIRR) for the proposed investment. g. Evaluate the acceptability of the proposed investment using NPV, IRR, and MIRR. Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year (t) Cash inflows (CF₂) 1 $25,000 2345 $25,000 $30,000 $25,000 $20,000 w an ex Print MacBook Air…arrow_forwardPayback Period Payson Manufacturing is considering an investment in a new automated manufacturing system. The new system requires an investment of $1,200,000 and either has: a. Even cash flows of $400,000 per year or b. The following expected annual cash flows: $150,000, $150,000, $400,000, $400,000, and $100,000. Required: Calculate the payback period for each case. Round your answer to one decimal place. a. years b. yearsarrow_forwardNPV and maximum return A firm can purchase new equipment for $25,000 that generates an annual cash inflow of $8,000 for 5 years. a. Determine the net present value (NPV) of the asset, assuming that the firm has a cost of capital of 15%. Is the project acceptable? b. Determine the maximum required rate of return that the firm can have and still accept the asset. a. The net present value (NPV) of the new equipment is (Round to the nearest cent.)arrow_forward
- 3 NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $18,250, and the project will yield cash inflows of $4,000 per year for 7 years. The firm has a cost of capital of 10%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm accept or reject the project? a. The NPV of the project is $ (Round to the nearest cent.) b. The IRR of the project is%. (Round to two decimal places.) c. Would you recommend that the firm accept the project? (Select the best answer below.) OYes O Noarrow_forwardNPV and maximum return A firm can purchase new equipment for $17,000 that generates an annual cash inflow of $4,000 for 8 years. a. Determine the net present value (NPV) of the asset, assuming that the firm has a cost of capital of 9%. Is the project acceptable? b. Determine the maximum required rate of return that the firm can have and still accept the asset. a. The net present value (NPV).of the new equipment is $ (Round to the nearest cent.) Based on its NPV, is the new equipment acceptable? (Select the best answer below.) Yes No b. The maximum required rate of return the firm can have and still accept the new equipment is %. (Round to two decimal places.)arrow_forwardQuestion 4 Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6th year and Ghc53400 for the 7th year. a. Find the Net Present Value (NPV) b. Determine the Internal Rate of Return c. Identify three ways in which the Net Present value is superior to the Internal Rate of return as investment criteriaarrow_forward
- Q5 From the attached please answer part G a. Determine the initial outlay of the project.b. Calculate the annual after-tax operating cash flow for Years 1 -5.c. Determine the terminal year non-operating cash flow in year 5:d. Taking into consideration all the information given, determine the Net Present Value of the project and advice the company on whether to invest in the new line of product.e. What is the estimated Internal Rate of Return (IRR) of the project?f. Should the project be accepted based on the IRR? g. Calculate to the following for Pharmos considering its tax rate of 25 percent. i. Total Market Value for the Firm ii, After-tax cost of Loaniii. After-tax cost of Bondsiv. Cost of Equityv. Cost of Preferred Stockvi. Weighted Average Cost of Capital (WACC)arrow_forwardwhich one is correct please confirm? QUESTION 24 Inco purchased a computer for $200,000, and this machine is expected to generate annual cash flows of $48,271 over the next 5 years. What is the expected rate of return on this investment? a. 8.84% b. 26.58% c. 6.61% d. None of these are correctarrow_forwardPayback Period Abbey Manufacturing is considering an investment in a new automated manufacturing system. The new system requires an investment of $1,200,000 and either has: a. Even cash flows of $600,000 per year or b. The following expected annual cash flows: $150,000, $150,000, $400,000, $400,000, and $100,000. Required: Calculate the payback period for each case. Round your answer to one decimal place. a. years b. yearsarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub