Question
In: Finance
?IRR, investment? life, and cash inflows??? Oak Enterprises accepts projects earning more than the? firm's 12%...
?IRR, investment? life, and cash inflows???
Oak Enterprises accepts projects earning more than the? firm's 12% cost of capital. Oak is currently considering a 10 year project that provides annual cash inflows of ?$50,000 and requires an initial investment of $315,100.
? (?Note:All amounts are after? taxes.)
a.??Determine the IRR of this project. Is it? acceptable?
b.??Assuming that the cash inflows continue to be ?$50,000 per? year, how many additional years would the flows have to continue to make the project acceptable? (that is, to make it have an IRR of 12?%)?
c.??With the given? life, initial? investment, and cost of? capital, what is the minimum annual cash inflow that the firm should? accept?
Solutions
Expert Solution
a.
| Cash flows | Year |
| (315,100.000) | 0 |
| 50,000.000 | 1 |
| 50,000.000 | 2 |
| 50,000.000 | 3 |
| 50,000.000 | 4 |
| 50,000.000 | 5 |
| 50,000.000 | 6 |
| 50,000.000 | 7 |
| 50,000.000 | 8 |
| 50,000.000 | 9 |
| 50,000.000 | 10 |
Use IRR function in Excel
IRR = 9.42%
b. FV = 0, PMT = 50,000, PV = -315,100, rate = 12%
use Nper function in Excel
number of years = 12.46
c, PV = -315,100, rate = 12%, N = 10 FV = 0
use PMT function in Excel
minimum payments = 55,767.71
jeff jeffy answered 2 years agoRelated Solutions
?IRR, investment? life, and cash inflows??? Oak Enterprises accepts projects earning more than the? firm's 12%...
?IRR, investment? life, and cash inflows???
Oak Enterprises accepts projects earning more than the? firm's
12% cost of capital. Oak is currently considering a 10 year project
that provides annual cash inflows of ?$50,000 and requires an
initial investment of $315,100.
? (?Note:All amounts are after? taxes.)
a.??Determine the IRR of this project.
Is it? acceptable?
b.??Assuming that the cash inflows continue to
be ?$50,000 per? year, how many additional years would the
flows have to continue to make the...
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IRR, investment life, and cash inflows Oak
Enterprises accepts projects earning more than the firm's 11%
cost of capital. Oak is currently considering a 13-year project
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taxes.)
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QUESTION: The more predictable a firm's cash inflows, the more net working capital it will need....
QUESTION: The more predictable a firm's cash inflows, the more
net working capital it will need.
ANSWER OPTIONS: True False You need to specifically state IN THE
SUBJECT LINE if the answer is TRUE or FALSE.
EXAMPLES OF INADEQUATE RESPONSES: “I think the answer is False.”
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Postings must be no less than 200 words in length to be
considered. Any posting less than 200 words in length will not be
reviewed.
The table shows the investment projected net cash inflows of the two projects over the coming...
The table shows the investment projected net cash inflows of the
two projects over the coming 5 years.
Year
Project A
Project B
1
$200000
$120000
2
$200000
$130000
3
$200000
$150000
4
$200000
$200000
5
$200000
$240000
Initial investment of $500000 and discount rate at 18% per year
under each project.
Discount factors for Year 1 to Year 5 as follows:
Year 1
0.8475
Year 2
0.7182
Year 3
0.6086
Year 4
0.5158
Year 5
0.4370
Find the payback...
When can a series of cash flows have MORE THAN one IRR?
When can a series of cash flows have MORE THAN one IRR?
a
first
cash flow is negative and all remaining cash flows are
positive
b
first
cash flow is positive and all remaining cash flows are
negative
c
some
cash flows after first year are positive and some cash flows are
negative
d
can
never have more than one IRR
consider the following three projects. All three have an initial investment of $300,000 Net Cash Inflows...
consider the following three projects. All three have an initial
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Net Cash Inflows
Project L
Project M
Project N
Year
Annual
Accumulated
Annual
Accumulated
Annual
Accumulated
1
$75,000
$75,000
$25,000
$25,000
$150,000
$150,000
2
75,000
150,000
75,000
100,000
150,000
300,000
3
75,000
225,000
200,000
300,000
4
75,000
300,000
250,000
550,000
5
75,000
375,000
350,000
900,000
6
75,000
450,000
7
75,000
525,000
8
75,000
600,000
Required
1.
Determine the payback period of each project. Rank the projects
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B. Yes, since a zero NPV indicates marginal acceptability.
C. No, since NPV is zero.
D. No, since NPV is negative.
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