Question

In: Finance

Compute the IRR static for Project E. The appropriate cost of capital is 7 percent. (Do...

Compute the IRR static for Project E. The appropriate cost of capital is 7 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

    

  Project E
  Time: 0 1 2 3 4 5
  Cash flow –$2,000 $750 $780 $720 $500 $300

    

  IRR %

  

Should the project be accepted or rejected?
Accepted
Rejected

Solutions

Expert Solution

a. IRR 18.85%
b. Accepted
Working:
IRR is the rate at which Net Present Value is zero.
Calculate NPV at 7%
Time Cash flow Discount factor Present Value
0 $       -2,000      1.0000 $       -2,000
1 $            750      0.9346 $            701
2 $            780      0.8734 $            681
3 $            720      0.8163 $            588
4 $            500      0.7629 $            381
5 $            300      0.7130 $            214
Total $            565
Calculate NPV at 20%
Time Cash flow Discount factor Present Value
0 $       -2,000      1.0000 $       -2,000
1 $            750      0.8333 $            625
2 $            780      0.6944 $            542
3 $            720      0.5787 $            417
4 $            500      0.4823 $            241
5 $            300      0.4019 $            121
Total $             -55
IRR = 7%+(20%-7%)*(565/(565+55))
= 18.85%
Since IRR is more than cost of capital, project is to be Accepted.

jeff jeffy answered 3 years ago
Next > < Previous

Related Solutions

Compute the IRR static for Project E. The appropriate cost of capital is 7 percent. (Do...
Compute the IRR static for Project E. The appropriate cost of capital is 7 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project E Time: 0 1 2 3 4 5 Cash flow –$1,400 $510 $600 $600 $380 $180 Should the project be accpeted or rejected?
Compute the IRR static for Project E. The appropriate cost of capital is 7 percent. (Do...
Compute the IRR static for Project E. The appropriate cost of capital is 7 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project E Time: 0 1 2 3 4 5 Cash flow –$1,400 $510 $600 $600 $380 $180 Should the project be accepted or rejected? accepted rejected
Compute the IRR static for Project E. The appropriate cost of capital is 8 percent. (Do...
Compute the IRR static for Project E. The appropriate cost of capital is 8 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) What is the IRR? Should it be accepted or rejected?        Project E   Time: 0 1 2 3 4 5   Cash flow –$1,000 $350 $480 $520 $300 $100
Compute the IRR static for Project E. The appropriate cost of capital is 8 percent. (Do...
Compute the IRR static for Project E. The appropriate cost of capital is 8 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project E Time: 0 1 2 3 4 5 Cash flow –$2,700 $830 $840 $760 $540 $340
Compute the IRR for Project F. The appropriate cost of capital is 13 percent. (Do not...
Compute the IRR for Project F. The appropriate cost of capital is 13 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Project F Time: 0 1 2 3 4 Cash flow: –$11,500 $3,600 $4,430 $1,770 $2,400 IRR__________% Should the project be accepted or rejected? accepted rejected
Compute the NPV for Project K if the appropriate cost of capital is 7 percent. (Negative...
Compute the NPV for Project K if the appropriate cost of capital is 7 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) Project K Time: 0 1 2 3 4 5 Cash flow: −$11,600 $5,800 $6,800 $6,800 $5,800 −$14,600 Should the project be accepted or rejected? rejected accepted
Compute the NPV for Project M if the appropriate cost of capital is 7 percent. (Negative...
Compute the NPV for Project M if the appropriate cost of capital is 7 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.)       Project M   Time: 0 1 2 3 4 5   Cash flow –$2,000 $550 $680 $720 $800 $300         NPV $       Should the project be accepted or rejected? Accepted Rejected
Compute the payback statistic for Project A if the appropriate cost of capital is 8 percent...
Compute the payback statistic for Project A if the appropriate cost of capital is 8 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 0 1 2 3 4 5 Cash flow: –$1,600 $590 $660 $640 $420 $220 Should the project be accepted or rejected?
commute the irr static for a project e the appropriatecost of capital is 9%commute...
commute the irr static for a project e the appropriate cost of capital is 9%commute the irr static for project e the appropriate cost of capital is 9%, project e time cash flow minus 1200 $430 $540 $560 $340 $140 the irr is
Compute the NPV statistic for Project Y if the appropriate cost of capital is 12 percent....
Compute the NPV statistic for Project Y if the appropriate cost of capital is 12 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) Project Y Time: 0 1 2 3 4 Cash flow: –$9,200 $3,590 $4,420 $1,760 $540 NPV: Should the project be accepted or rejected? accepted rejected
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT