Question
In: Accounting
Projects can have cash flows where there are two sign changes of the cash flows. This...
Projects can have cash flows where there are two sign changes of the cash flows. This creates issues with the mathematics used to solve the problems. You need to be aware of this issue and know where you could look to solve a problem with these types of cash flows (which are not that unusual).
Select a project from work or another project you are familiar with and discuss the project details (conceptually, this is not an analytical number crunching exercise).
Be sure to include what in the project creates and results in the issues that would cause the multiple roots. How many potential roots does your project have?
800 words
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Two mutually exclusive projects have the following forecasted cash flows:
Two mutually exclusive projects have the following forecasted
cash flows:
Year A B
0 -20,000 -20,000
1 10,000 0
2 10,000 0
3 10,000 0
4 10,000 60,000
Compute the internal rate of return for each project.
Compute the NPV for each project if the required rate is
10%.
Which project should be accepted, and why?
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$52
$27
$19
$22
$17
B
−$100
$22
$41
$48
$61
a. What are the IRRs of the two projects?
b. If your discount rate is 5.4%, what are the NPVs of the two
projects?
c. Why do IRR and NPV rank the two projects differently?
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$52
$27
$19
$18
$17
B
−$101
$19
$40
$51
$58
a. What are the IRRs of the two projects?
b. If your discount rate is 5.4%, what are the NPVs of the two
projects?
c. Why do IRR and NPV rank the two projects differently?
a. What...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
-$ 49
$ 24
$ 19
$ 20
$ 13
B
-$ 100
$ 18
$ 39
$ 48
$ 59
a. What are the IRRs of the two projects?
b. If your discount rate is
5.5 %
what are the
NPVs
of the two projects?
c. Why...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
-$48
$27
$ 21
$ 19
$ 12
B
−$98
$20
$ 41
$ 51
$ 59
a. What are the IRRs of the two projects? (Round to one
decimal place.)
b. If your discount rate is 4.7% what are the NPVs of the two
projects?
c. Why...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$51
$24
$18
$21
$17
B
−$102
$21
$38
$49
$61
a. What are the IRRs of the two projects?
b. If your discount rate is
5.1%,
what are the
NPVs
of the two projects?
c. Why do IRR and NPV rank the two projects differently?
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$51
$26
$20
$18
$13
B
−$101
$22
$39
$49
$58
a. What are the IRRs of the two projects?
b. If your discount rate is
5.4%,
what are the
NPVs
of the two projects?
c. Why do IRR and NPV rank the two projects differently?
a. What...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$51
$26
$18
$19
$16
B
−$100
$20
$41
$51
$60
a. What are the IRRs of the two projects?
b. If your discount rate is
5.4%,
what are the
NPVs
of the two projects?
c. Why do IRR and NPV rank the two projects differently?
a. What...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
-$52
$24
$20
$21
$17
B
-$100
$18
$38
$51
$60
a. What are the IRRs of the two projects? The IRR for project A
is_______%. (Round to one decimal place.)
b. If your discount rate is 4.9%, what are the NPVs of the two
projects?______.
c. Why...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the
projects are given in the following table ($ million):
Project
Year 0
Year 1
Year 2
Year 3
Year 4
A
−$51
$24
$21
$22
$12
B
−$102
$20
$38
$50
$58
a. What are the IRRs of the two projects?
b. If your discount rate is 5.4 %, what are the NPVs of the two
projects?
c. Why do IRR and NPV rank the two projects differently?
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