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
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QUESTION: The more predictable a firm's cash inflows, the more
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ANSWER OPTIONS: True False You need to specifically state IN THE
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EXAMPLES OF INADEQUATE RESPONSES: “I think the answer is False.”
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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
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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
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consider the following three projects. All three have an initial investment of $300,000 Net Cash Inflows...
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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.
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D. No, since NPV is negative.
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