If an investment is producing an internal rate of return that is equal to the required...

If an investment is producing an internal rate of return that is equal to the required return, the Net Present Value of the project will be ______ and the Profitability Index of the project will be ______.

Solutions

Expert Solution

If Internal rate of return is equal to required rate of return, the Net Present Value of the project will becomes ZERO(0).

If Internal rate of return is equal to required rate of return, the Profitability Index of the project will be equal to ONE(1).

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Internal Rate of Return is frequently recommended, whenever an investment appraisal is required. This is because...

Internal Rate of Return is frequently recommended, whenever an investment appraisal is required. This is because it provides a percentage rate of return on all proposed investments. Describe this method, identify any technical pitfalls, and consider if any solutions are possible.

Find Internal rate of return of the investment opportunity

Royal Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $16,200,000; it will enable the company to increase its annual cash inflow by $5,000,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $32,400,000; it will enable the company to increase annual cash flow by $7,500,000 per year. This...

The point where a project produces a rate of return equal to the required rate of...

The point where a project produces a rate of return equal to the required rate of return is known as the 117 In financial breakeven, the EAC is used to (choose all that apply) A. external breakeven point. B. accounting profit breakeven point. C. internal breakeven point. D. financial breakeven point. E. contribution margin breakeven point. F. allocate depreciation over the life of a project. G. determine the tax benefit of depreciation. H. allocate the initial investment over the life...

The internal rate of return is unreliable as an indicator of whether or not an investment...

The internal rate of return is unreliable as an indicator of whether or not an investment should be accepted given which one of the following? Multiple Choice a.One of the time periods within the investment period has a cash flow equal to zero. b.The initial cash flow is negative. c.The investment has cash inflows that occur after the required payback period. d.The investment is mutually exclusive with another investment of a different size. e.The cash flows are conventional.

The internal rate of return for an investment with contributions of $3,000 at time 0 and...

The internal rate of return for an investment with contributions of $3,000 at time 0 and $1,000 at time 1 and returns of $2,000 at time 1 and $4,000 at time 2 can be expressed as 1/ n . Find n.

The internal rate of return represents the rate of interest that recovers the initial investment outlay....

The internal rate of return represents the rate of interest that recovers the initial investment outlay. Discuss the validity of this statement. paragraph answer:

Explain why the required rate of return on a firm's assets must be equal to the...

Explain why the required rate of return on a firm's assets must be equal to the weighted average cost of capital associated with its liabilities and equity. Explain using the concepts from the course.

Critique Internal Rate of Return and compare to Return on Assets, Investment, Capital, and defend best...

Critique Internal Rate of Return and compare to Return on Assets, Investment, Capital, and defend best practice in assessing overall financial performance.

What is the internal rate of return (IRR) on an investment with the following cash flows?...

What is the internal rate of return (IRR) on an investment with the following cash flows? Holding period 5 years. Round your answer to nearest 0.25%. Please show work (NO EXCEL) Year Net Income Purchase Price $4,000,000 1 $250,000 2 $300,000 3 $350,000 4 $400,000 5 $450,000 Resale $4,750,000 (net of costs)

Internal rate of return and net present value are related in that: Internal rate of return...

Internal rate of return and net present value are related in that: Internal rate of return formed the basis for the eventual development of the net present value theory. Internal rate of return finds a discount rate that produces a net present value of zero. Net present value formed the basis for the eventual development of the internal rate of return theory. Net present value can only be used to evaluate irregular cash flows, whereas internal rate of return can...

Subjects