Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 3PS
a)
Summary Introduction
To determine: The
Net present value (NPV) is the difference between the present value of
b)
Summary Introduction
To determine: The
Internal rate of return (IRR) is the discount rate at which the present value of cash inflow will be equal to the present value of cash outflow.
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3) could you use the Figure below that shows the net present value profile of two projects Y and W to answer the following questions:
What is the internal rate of return on project Y?
Determine the “approximate” discount rate at which you would be indifferent between the two projects
Find the “approximate” net present value of project W when the discount rate is 4%.
1. What is the project’s net present value?
2. What is the project’s internal rate of return to the nearest whole percent?
3. What is the project’s simple rate of return?
i) Calculate the payback period for each project.
ii) Calculate the net present value (NPV) for each project.
Chapter 5 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 5 - (IRR) Check the IRRs for project F in Section 5-3.Ch. 5 - (IRR) What is the IRR of a project with the...Ch. 5 - (XIRR) What is the IRR of a project with the...Ch. 5 - Payback a. What is the payback period on each of...Ch. 5 - IRR Write down the equation defining a projects...Ch. 5 - Prob. 3PSCh. 5 - IRR rule You have the chance to participate in a...Ch. 5 - IRR rule Consider a project with the following...Ch. 5 - IRR rule Consider projects Alpha and Beta: The...Ch. 5 - Capital rationing Suppose you have the following...
Ch. 5 - Payback Consider the following projects: a. If the...Ch. 5 - Prob. 9PSCh. 5 - IRR Calculate the IRR (or IRRs) for the following...Ch. 5 - IRR rule Consider the following two mutually...Ch. 5 - IRR rule Mr. Cyrus Clops, the president of Giant...Ch. 5 - Prob. 13PSCh. 5 - Profitability index Look again at projects D and E...Ch. 5 - Prob. 15PSCh. 5 - Prob. 16PS
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Similar questions
- Q1) How much is the Profitability Index? Q2) What is the Discounted Payback period of the project? Q3) What is the NPV of the Project?arrow_forwardA. 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 percentarrow_forwardBased on the picture, Calculate: a) The payback period for the project b) The discounted payback period for the project c) The net present value for the project Please help me ASAP. Thank you. I'm tryna do my revision. ?arrow_forward
- 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?arrow_forwardCalculate internal Rate of Return of the project. Should the project be accepted? If reinvestment rate assumption of IRR is changed to cost of capital 11% , what should the modified rate of return ( MIRR)?arrow_forwardConsider the following sets of investment projects: (a) Classify each project as either simple or nonsimple.(b) Compute the i* for Project A, using the quadratic equation.(c) Obtain the rate(s) of return for each project by plotting the PW as a function of interest rate.arrow_forward
- If the cash flows for Project M are C0 = -1,000; C1 = +800; C2 = +700 and C3= -200. Calculate the IRR for the project. For what range of discount rates does the project have a positive NPV?arrow_forwardCalculate the net present value of each project (project A and B)arrow_forwardWhat is the estimated Internal Rate of Return (IRR) of the project?Should the project be accepted based on the IRR?arrow_forward
- Calculate for each project: The payback period for each project The Net Present Value (NPV) The Profitability index Which project should be accepted and why? PLEASE SEE ATTACHED PHOTO TO ANSWER THE ABOVE QUESTIONSarrow_forwardWhat is the formula for calculating present value of a project? If you are given annual profit in perpetuity, initial cost, tax rate, unlevered cost of equity, and how much of the project cost is finance through debt?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_forward
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