EBK CFIN
6th Edition
ISBN: 9781337671743
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 9, Problem 5PROB
Summary Introduction
IRR of a project is calculated using a financial calculator. All financial calculators have an inbuild cash flow register, Cash flows in accordance of the timeline and with proper +/- signs should be input, then press the key labelled “IRR”. It will return the internal rate of return of the project.
A project has initial cost of $20,070 and is expected to generate $8,500 for the next three years.
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What is the internal rate of return (IRR) of a project that costs $20,070 if it is expected to generate $8,500 per year for three years?
What is the IRR of a project that costs $1,000 now and produces $900 next year and $900 the year after?
What is the IRR of a project that costs $1,000 now and produces $1,000next year?
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- If a copy center is considering the purchase of a new copy machine with an initial investment cost of $150,000 and the center expects an annual net cash flow of $20,000 per year, what is the payback period?arrow_forwardWhat is the ERR for this project? Assume that = 12% and MARR = 20% per year. Is this project considered to be profitable? What is the simple payback period?arrow_forwardYou 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?arrow_forward
- 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?arrow_forwardWhat is the NPV of a project with an initial investment of $100, a cash flow in one year of $105, and a discount rate of 10 percent?arrow_forwardIf a project costs $120,000 and is expected toreturn $40,000 annually, how long does it take torecover the initial investment? What would be thediscounted payback period at i = 15%?arrow_forward
- The James Company is considering an investment with a cost today of $1,500,000 and which will produce the following net inflows: Year 1 600,000 Year 2 300,000 Year 3 200,000 Year 4 400,000 Year 5 500,000 What is the Payback Period for the investment?arrow_forwardCompute the traditional payback period (PB) and the discounted payback period (DPB) for a project that costs $329,000 if it is expected to generate $94,000 per year for five years? The firm’s required rate of return is 12.5 percent? Should the project be purchased?arrow_forwardWhat is the minimum number of years that an investment costing $500,000 must return $65,000 per year at a discount rate of 13% in order to be an acceptable investment?arrow_forward
- What is the IRR of a project that costs $1,000 now and produces $500next year and $500 the year after?arrow_forwardSuppose 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.arrow_forwardConsider a project in which you have to invest $15,000 today and you will receive $24847 in one year. What is the internal rate of return (IRR) of this project? The IRR is % (Keep 2 decimal places). Answer:arrow_forward
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