An investment has been found to have two different IRRs, one at 14% and the other...
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An investment has been found to have two different IRRs, one at 14% and the other at 20%. When a required return of 17% is used, the NPV of the investment is negative. Knowing this: a. What range of required returns will generate a negative NPV? b. What range of required returns will generate a positive NPV? Describe why choosing an investment with the highest Profitability Index might not always result in getting the highest NPV? An investment has been found to have two different IRRs, one at 14% and the other at 20%. When a required return of 17% is used, the NPV of the investment is negative. Knowing this: a. What range of required returns will generate a negative NPV? b. What range of required returns will generate a positive NPV? Describe why choosing an investment with the highest Profitability Index might not always result in getting the highest NPV?
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Answer rating: 100% (QA)
Answer I Given that the necessary return of 17 which falls between the two IRRs of 14 and 20 results in a negative net present value NPV the range of required returns that will do so is as follows 20 ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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