A cutting-edge product of Continental Fan had the following net cash flow series during its first...

A cutting-edge product of Continental Fan had the following net cash flow series during its first 5-year period on the market. Find all rate of return values between 0% and 100%.

Year	Net Cash Flow, $
0	-50,000
1	36,000
2	25,000
3	13,000
4	-2,000
5	10,000

The rate of return is ______%.

Expert Solution

Calculate the rate of return of the following cash flows.

Year	0	1	2	3	4	5
Net Cash Flow, $	-50,000	36,000	25,000	13,000	-2,000	10,000

Calculating the rate of return using trial and error method

Let the rate of interest is 30%. Calculate PW at 30%.

PW = -50,000 + 36,000 (P/F, 30%, 1) + 25,000 (P/F, 30%, 2) + 13,000 (P/F, 30%, 3) – 2,000 (P/F, 30%, 4) + 10,000 (P/F, 30%, 5)

PW = -50,000 + 36,000 (0.76923) + 25,000 (0.59172) + 13,000 (0.45517) – 2,000 (0.35013) + 10,000 (0.26933) = 395.53

The PW is positive. Increase the rate of interest to get negative PW. Increase the rate of interest to 31% and calculate PW.

PW = -50,000 + 36,000 (P/F, 31%, 1) + 25,000 (P/F, 31%, 2) + 13,000 (P/F, 31%, 3) – 2,000 (P/F, 31%, 4) + 10,000 (P/F, 31%, 5)

PW = -50,000 + 36,000 (0.76335) + 25,000 (0.58271) + 13,000 (0.44482) – 2,000 (0.33955) + 10,000 (0.25920) = -256.09

Using interpolation

ROR = 30% + [395.53 – 0 ÷ 395.53 – (-256.09)] * 1%
ROR = 30.606%

The rate of return is 30.606%.

Rahul Sunny answered 1 year ago

Suppose Valley Technology had the following cash flow results for 2017: Net Cash Flow from Operating...

Suppose Valley Technology had the following cash flow results for 2017: Net Cash Flow from Operating Activities of $7,800,000 Net Cash Flow from Investing Activities of -$3,600,000 Net Cash Flow from Financing Activities of $1,900,000 Create a statement of cash flows with amounts in thousands. What is the Net Cash Flow? Please specify your answer in the same units as the statement of cash flows.

Suppose Stuart Company had the following cash flow results for 2017: Net Cash Flow from Operating...

Suppose Stuart Company had the following cash flow results for 2017: Net Cash Flow from Operating Activities of $5,800,000 Net Cash Flow from Investing Activities of -$4,900,000 Net Cash Flow from Financing Activities of $700,000 Create a statement of cash flows with amounts in thousands. What is the Net Cash Flow? Please specify your answer in the same units as the statement of cash flows.

During the past year, a company had cash flow to creditors, an operating cash flow, and...

During the past year, a company had cash flow to creditors, an operating cash flow, and net capital spending of $30,817, $70,361, and $31,140, respectively. The net working capital at the beginning of the year was $12,526 and it was $14,950 at the end of the year. What was the company's cash flow to stockholders during the year? Multiple Choice $2,424 $10,828 $5,980 $4,234

Consider the following two cash flow series of payments: Series A is a geometric series increasing...

Consider the following two cash flow series of payments: Series A is a geometric series increasing at a rate of 4% per year. The initial cash payment at the end of year 1 is $1,000. The payments occur annually for 5 years. Series B is a uniform series with payments of value X occurring annually at the end of years 1 through 5. You must make the payments in either Series A or Series B. Click here to access the...

For the net cash flow series, find the external rate of return (EROR) using the MIRR...

For the net cash flow series, find the external rate of return (EROR) using the MIRR method with an investment rate of 25% per year and a borrowing rate of 11% per year. Year 1 2 3 4 5 6 Net Cash Flow, $ 4,000 -5,000 -3,000 6,000 -800 3,400 The external rate of return is %.

6/ Stormer Company reports the following amounts on its statement of cash flow: Net cash provided...

6/ Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities was $33,500; net cash used in investing activities was $12,200 and net cash used in financing activities was $15,300. If the beginning cash balance is $6,100, what is the ending cash balance? Multiple Choice $67,100. $54,900. $36,500. $6,000. $12,100. 7/ Analysis reveals that a company had a net increase in cash of $21,320 for the current year. Net cash provided by...

1/ Stormer Company reports the following amounts on its statement of cash flow: Net cash provided...

1/ Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities was $39,500; net cash used in investing activities was $14,600 and net cash used in financing activities was $18,900. If the beginning cash balance is $7,300, what is the ending cash balance? Multiple Choice $80,300. $65,700. $42,500. $6,000. $13,300. 2/ company had net cash flows from operations of $124,000, cash flows from financing of $338,000, total cash flows of $512,000, and...

1. A company had the following purchases during its first year of operations:

1. A company had the following purchases during its first year of operations:PurchasesJanuary:11 units at $121February:21 units at $131May:16 units at $141September:13 units at $151November:11 units at $161On December 31, there were 31 units remaining in ending inventory. These 31 units consisted of 3 from January, 5 from February, 7 from May, 5 from September, and 11 from November. Using the specific identification method, what is the cost of the ending inventory?2. During the first week of January, an employee...

can the cash balance be less than net cash flow for first year when this happens?

What is the Net Present Value of the following cash flow stream? Year Cash Flow 0...

What is the Net Present Value of the following cash flow stream? Year Cash Flow 0 -$489 1 $363 2 $192 3 $161 4 $256 Assume an interest rate of 13% Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. If your answer is negative, enter your answer as a negative number rounded off to two decimal points.

Question