Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 5, Problem 21QAP
MIRR Suppose the company in the previous problem uses a discount rate of 11 percent and a reinvestment rate of 8 percent on all of its projects. Calculate the MIRR of the project using these rates for all three methods.
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A project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 2 percent? Enter your final answer to two decimal places.
Year
Cash flow
0
-1,745
1
537
2
2,066
3
3,912
Find the external rate of return (ERR) for the following project when the external reinvestment rate is $ = 10% (equal to the MARR). Is this an acceptable project?
A. Calculate the profitability index for project X.
B. Calculate the profitability for project Y
C. Using the NPV method combined with the PI aporoach, which project would you select? Use a discount rate of 13 percent
Chapter 5 Solutions
Corporate Finance
Ch. 5 - Payback Period and Net Present Value If a project...Ch. 5 - Net Present Value Suppose a project has...Ch. 5 - Comparing Investment Criteria Define each of the...Ch. 5 - Payback and Internal Rate of Return A project has...Ch. 5 - Prob. 5CQCh. 5 - Capital Budgeting Problems What are some of the...Ch. 5 - Prob. 7CQCh. 5 - Prob. 8CQCh. 5 - Net Present Value versus Profitability Index...Ch. 5 - Internal Rate of Return Projects A and B have the...
Ch. 5 - Net Present Value You are evaluating Project A and...Ch. 5 - Modified Internal Rate of Return One of the less...Ch. 5 - Net Present Value It is sometimes stated that the...Ch. 5 - Prob. 14CQCh. 5 - Prob. 1QAPCh. 5 - Prob. 2QAPCh. 5 - Prob. 3QAPCh. 5 - Prob. 4QAPCh. 5 - Prob. 5QAPCh. 5 - Prob. 6QAPCh. 5 - Prob. 7QAPCh. 5 - Prob. 8QAPCh. 5 - Prob. 9QAPCh. 5 - Prob. 10QAPCh. 5 - NPV versus IRR Consider the following cash flows...Ch. 5 - Prob. 12QAPCh. 5 - Prob. 13QAPCh. 5 - Prob. 14QAPCh. 5 - Prob. 15QAPCh. 5 - Comparing Investment Criteria Consider the...Ch. 5 - Prob. 17QAPCh. 5 - Comparing Investment Criteria Consider the...Ch. 5 - Prob. 19QAPCh. 5 - Prob. 20QAPCh. 5 - MIRR Suppose the company in the previous problem...Ch. 5 - Prob. 22QAPCh. 5 - Prob. 23QAPCh. 5 - Prob. 24QAPCh. 5 - Prob. 25QAPCh. 5 - Prob. 26QAPCh. 5 - Prob. 27QAPCh. 5 - Prob. 28QAPCh. 5 - Prob. 29QAPCh. 5 - Prob. 30QAPCh. 5 - Construct a spreadsheet to calculate the payback...Ch. 5 - Based on your analysis, should the company open...Ch. 5 - Prob. 3MC
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Use the information provided to answer the questions Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to twodecimal places).Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). Use your answers from previous question to recommend the project that should be chosen. Motivateyour choice.arrow_forwardA) What is the IRR for Project A and B? B) if required return is 8%, what is the NPV of project A and project B? C) at what discount rate would the company be indifferent between these 2 project?arrow_forwardConsider the following cash flows, for four different projects: (given) (a) Calculate the conventional payback period for each project.(b) Determine whether it is meaningful to caJculate a payback period for Project D.(c) Assuming i = I 0% calculate the discounted-payback period for each project.arrow_forward
- Calculate the Payback Period of Project A (expressed in years, months and days) Calculate the Accounting Rate of Return on average investment of Project A (expressedto two decimal places). Calculate the Benefit Cost Ratio of both projects (expressed to two decimal places). Which project should be chosen? Why? Calculate the Internal Rate of Return of Project B (expressed to two decimal places). Youranswer must include two net present value calculations (using consecutiverates/percentages) and interpolation.arrow_forwardProfitability index. Given the discount rate and the future cash flow of each project listed in the following table, , use the PI to determine which projects the company should accept. ..... What is the Pl of project A? (Round to two decimal places.)arrow_forwardUse these data to compute for each (a) the NPV at discount rates of 10 and 5 percent, (b) the BCR at the same rates, and (c) the internal rate of return for each. Describe the facts about the projects that would dictate which criterion is appropriate, and indicate which project is preferable under each circumstance.arrow_forward
- 2) First, calculate the payback period and NPV for all projects below. For all the projects, the relevant discount rate is 10%. Then, comment on why the payback period provides misleading information about the following: a. Project A b. Project B versus Project C c. Project D versus Project E d. Project D versus Project F Year A B C D E F 0 -1.000 -1.000 -1.000 -1.000 -1.000 -1.000 1 1,000 100 400 500 400 500 2 200 300 500 400 500 3 300 200 500 400 10.000 4 400 100 400 5 500 500 400arrow_forwardSuppose the following two independent investment opportunities are available to Fitz, Inc. The appropriate discount rate is 8 percent. Year Project Alpha Project Beta 0 −$5,500 −$7,100 1 2,800 1,600 2 2,700 5,500 3 1,700 4,500 a. Compute the profitability index for each of the two projects. (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) b. Which project(s), if either, should the company accept based on the profitability index rule? multiple choice Neither project Project Beta Both projects Project Alphaarrow_forwarda. Compute annual rate of return, Pay back period b NPV using 14% discounts rate , Is the Project acceptable using this discount rate Compute NPV using 11% discounts rate. Is the Project acceptable using this discount ratearrow_forward
- Project Analysis. Assume that you are evaluating the following three mutually exclusive projects: A. Complete the following analyses. (For the last two lines, Terminal Value, please write in the dollar amount of the terminal value.) B. Compare and explain the conflicting rankings of the NPVs and TRRs versus the IRRs. C. Using different discount rates, is it possible to get different rankings within the NPV calculation? Why or why not? D. If 10 percent is the required return, which project is preferred? E. Which is the fairer representation of these two projects, TRR or IRR? Why?arrow_forwardDetermine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in the table above. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent.arrow_forwardDuo Corporation is evaluating a project with the following cash flows. The company uses a discount rate of 12% and a reinvestment rate of 9% on all is projects. Calculate the MIRR of the project using all three methods with these interest rates.arrow_forward
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