Corporate Finance
Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 5, Problem 22QAP
Summary Introduction

Introduction: The term IRR refers to the rate at which NPV value becomes zero which represents that the initial cost is equivalent to the present value of the cash inflows during the life of the project.

To calculate: IRR of the project along with the discount rate at which NPV is maximum and approach to determine the maximum NPV.

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You are evaluating a project that costs $75,000 today. The project has an inflow of $ 155,000 in one year and an outflow of $65,000 in two years. What are the IRRs for the project? What discount rate results in the maximum NPV for this project? How can you determine that this is the maximum NPV?
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.
You are evaluating a project that costs $75,000 today. The project has an inflow of $160,000 in one year and an outflow of $65,000 in two years.   What are the IRRs for the project?     What discount rate results in the maximum NPV for this project?

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Corporate Finance

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