Question
In: Finance
Consider two mutually exclusive projects A and B: Cash Flows (dollars) Project C0 C1 C2 NPV...
Consider two mutually exclusive projects A and B:
|
Cash Flows (dollars) |
||||
| Project | C0 | C1 | C2 | NPV at 12% |
| A | −31,000 | 21,800 | 21,800 | +$5,843 |
| B | −51,000 | 34,000 | 34,000 | +6,462 |
a. Calculate IRRs for A and B. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Solutions
Expert Solution
Project A
Internal rate of return can be calculated using a financial calculator by inputting the below:
- Press the CF button.
- CF0= -$31,000. The initial cash flow is indicated by a negative sign since it is a cash outflow.
- Cash flow for each of the fifteen years should be entered.
- Press Enter and down arrow after inputting each cash flow.
- After entering the last cash flow cash flow, press the IRR and CPT button to get the IRR of the project.
The IRR of the project is 26.09%.
Project B
Internal rate of return can be calculated using a financial calculator by inputting the below:
- Press the CF button.
- CF0= -$51,000. The initial cash flow is indicated by a negative sign since it is a cash outflow.
- Cash flow for each of the fifteen years should be entered.
- Press Enter and down arrow after inputting each cash flow.
- After entering the last cash flow cash flow, press the IRR and CPT button to get the IRR of the project.
The IRR of the project is 21.53%.
jeff jeffy answered 2 years agoRelated Solutions
Consider projects A and B: Cash Flows (dollars) Project C0 C1 C2 NPV at 10% A...
Consider projects A and B:
Cash Flows (dollars)
Project
C0
C1
C2
NPV at 10%
A
−33,000
23,400
23,400
+$7,612
B
−53,000
36,000
36,000
+9,479
a. Calculate IRRs for A and B. (Do not
round intermediate calculations. Enter your answers as a percent
rounded to 2 decimal places.)
Consider the following two mutually exclusive projects: Cash Flows ($) Project C0 C1 C2 C3 A...
Consider the following two mutually
exclusive projects:
Cash Flows ($)
Project
C0
C1
C2
C3
A
-$100
+$60
+$60
+$60
B
-$100
----
----
+$208.35
Calculate the NPV of each project for a discount rate of
14%.
What is approximately the IRR for each project individually?
Use the IRR cross-over method to determine which of the projects
you should accept (describe the correct decision rule describing
when you pick A versus B based on what discount rate).
Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A...
Here are the cash flows for two mutually exclusive projects:
Project
C0
C1
C2
C3
A
−$
23,000
+$
10,120
+$
10,120
+$
10,120
B
−
23,000
0
0
+
31,050
What is the IRR of each project? (Round your answers to
2 decimal places.)
Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A...
Here are the cash
flows for two mutually exclusive projects:
Project
C0
C1
C2
C3
A
−$
21,800
+$
9,592
+$
9,592
+$
9,592
B
−
21,800
0
0
+
29,430
What is the IRR of each project? (Round your answers to 2
decimal places.)
PRoject A %
Project B %
Consider the following two mutually exclusive projects withtheir expected Cash Flows ($)Project C0 C1...
Consider the following two mutually exclusive projects with
their expected Cash Flows ($)Project C0 C1 C2 C3A –$100 +$60 +$60 +$60B –$100 ------ ------ +$208.35What is the cross-over rate for these two projects?a. unknown, because the discount rate is unkownb. 28%c. 36%d. 32%e. 15%
Consider the following projects: Cash Flows ($) Project C0 C1 C2 C3 C4 C5 A −2,000...
Consider the following projects:
Cash Flows ($) Project C0 C1 C2 C3 C4 C5
A −2,000 2,000 0 0 0 0
B −4,000 2,000 2,000 5,000 2,000 2,000
C −5,000 2,000 1,300 0 2,000 2,000
a. If the opportunity cost of capital is 12%, which project(s)
have a positive NPV?
Positive NPV project(s)
Project A
Project B
Project C
Projects A and B
Projects A and C
Projects B and C
Projects A, B, and C
No project
b. Calculate...
Consider the following projects: Cash Flows ($) Project C0 C1 C2 C3 C4 C5 A −2,500...
Consider the following projects:
Cash Flows ($)
Project
C0
C1
C2
C3
C4
C5
A
−2,500
2,500
0
0
0
0
B
−5,000
2,500
2,500
5,500
2,500
2,500
C
−6,250
2,500
2,500
0
2,500
2,500
a. If the opportunity cost of capital is 9%,
which project(s) have a positive NPV?
Positive NPV project(s)
Project A
Project B
Project C
Projects A and B
Projects A and C
Projects B and C
Projects A, B, and C
No project
b. Calculate...
Consider the following projects: Cash Flows ($) Project C0 C1 C2 C3 C4 C5 A −2,800...
Consider the following
projects:
Cash Flows ($)
Project
C0
C1
C2
C3
C4
C5
A
−2,800
2,800
0
0
0
0
B
−5,600
2,800
2,800
5,800
2,800
2,800
C
−7,000
2,800
2,500
0
2,800
2,800
If the opportunity
cost of capital is 12%, which project(s) have a positive NPV?
Positive NPV Projects
Calculate the payback
period for each project.
Project A
years
Project B
years
Project C
years
Which project(s) would
a firm using the payback rule accept...
Cash flows of Project A and B are as following: Project C0 C1 C2 C3 C4...
Cash flows of Project A and B are as following:
Project
C0
C1
C2
C3
C4
C5
A
-9000
2000
3000
4000
5000
6000
B
-11000
2000
3000
4000
5000
6000
Compute the
payback periods for the following two projects.
Payback period
for A = _________ years; for B __________years
If the discount
rate is 10%, what is the discounted payback period?
Discounted
payback period for A=_________ years; for B __________years
A project has the following forecasted cash flows: Cash Flows Thousands of dollars C0 C1 C2 C
A project has the following forecasted cash flows:
Cash Flows
Thousands of dollars
C0 C1 C2 C3
-100 40
60
50
The investor expected rate of return is 10%. The cost of capital
is 12%.
Required:
What will you choose to be the discount rate? Why?
Please calculate the payback period (PP) and return on
investment (ROI).
Please calculate NPV，PVI and IRR..
Make decision based on the above calculation and explain the
reasons.
David said that the profit is the same as...
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