PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 5, Problem 3SQ
(XIRR) What is the
(All other cash flows are 0.)
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Mathematically, how can we determine the rate of return for a project's cash flow?
A project's IRR: A) All of these answers are correct. B is the average rate of return necessary to pay back the project's capital providers. C is equal to the discounted cash flows divided by the number of cash flows if the cash flows are a perpetuity. D will change with the cost of capital.
Depending on the cash flow assumption, should the project must use continuous cash flow? why?
Chapter 5 Solutions
PRIN.OF CORPORATE FINANCE
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 - Payback Consider the following projects: a. If the...Ch. 5 - Prob. 3PSCh. 5 - IRR Write down the equation defining a projects...Ch. 5 - Prob. 5PSCh. 5 - IRR Calculate the IRR (or IRRs) for the following...Ch. 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 - IRR rule Consider the following two mutually...Ch. 5 - IRR rule Mr. Cyrus Clops, the president of Giant...Ch. 5 - Prob. 12PSCh. 5 - Investment criteria Consider the following two...Ch. 5 - Profitability index Look again at projects D and E...Ch. 5 - Capital rationing Suppose you have the following...Ch. 5 - Prob. 17PSCh. 5 - Prob. 18PS
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- Here are cash flows for a project under consideration. C(0)= -$8160, C(1)=6180, and C(2)=20280. What is the IRR of the project?arrow_forwardWhat is nonnormal cash flow projects?arrow_forwardWhich of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. The lower the WACC used to calculate a project's NPV, the lower the calculated NPV will be. If a project's NPV is less than zero, then its IRR must be less than the WACC. If a project's NPV is greater than zero, then its IRR must be less than zero. The NPV of a relatively low-risk project should be found using a relatively high WACC. A project's NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC. 000oarrow_forward
- 5. IRR (S5.3) Write down the equation defining a project's internal rate of return (IRR). In practice, how is IRR calculated?arrow_forwardWhich of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. a. If a project's IRR is greater than its WACC, then the MIRR will be greater than the IRR. b. If a project's IRR is greater than its WACC, then the MIRR will be less than the IRR. c. A project's MIRR is always greater than its regular IRR. d. To find a project's MIRR, we compound cash inflows at the IRR and then discount the terminal value back to t = 0 at the WACC. e. A project's MIRR is always less than its regular IRR.arrow_forwardWhich of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. a. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV. b. If a project has normal cash flows and its IRR exceeds its cost of capital, then the project's NPV must be positive. c. The IRR calculation implicitly assumes that all cash flows are reinvested at the cost of capital. d. If Project A has a higher IRR than Project B, then Project A must have the lower NPV. e. The IRR calculation implicitly assumes that cash flows are withdrawn from the business rather than being reinvested in the business.arrow_forward
- How can we predict the future cash flows in a project?arrow_forwardC So, the cash flows of the project under this quantity assumption are: Time 0 1 2 3 4 5 The NPV under this assumption is: NPV=- ANPV/AQ=arrow_forwardState a method that translates a project's cash flows into an equivalent net present value?arrow_forward
- Mathematically, we can determine the rate of return for a given project’s cash flow series by identifying an interest rate that equates the present worth of its cash flows to zero. Select one: True False and explainarrow_forwardWhich of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. O a. If a project's IRR is positive, then its NPV must also be positive. O b. A project's regular IRR is found by compounding the cash inflows at the WACC to find the present value (PV), then discounting the TV to find the IRR. O c. A project's IRR is the discount rate that causes the PV of the inflows to equal the project's cost. O d. If a project's IRR is smaller than the WACC, then its NPV will be positive. O e. A project's regular IRR is found by compounding the initial cost at the WACC to find the terminal value (TV), then discounting the TV at the WACC.arrow_forwardDefine each of the following terms: f. Nonnormal cash flow projects; normal cash flow projects; multiple IRRsarrow_forward
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