Consider an investment project with the following cash flows: n Cash Flow 0..-$5,000 1..........$0 2...$4,840 3...$1,331 Compute
Question:
Consider an investment project with the following cash flows:
n Cash Flow
0………………..-$5,000
1………………..........$0
2………………...$4,840
3………………...$1,331
Compute the IRR for this investment. Is this project acceptable at MARR = 10%?
MARRMinimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
Step by Step Answer:
5000 4840PF i 2 1331PF i 3 0 ...View the full answer
Related Video
The internal rate of return, or IRR, is a metric used to measure the profitability of an investment. It is the discount rate that makes the net present value of an investment equal to zero. To calculate the IRR, we need to know the investment\'s cash flows. These are the inflows and outflows of cash that will result from the investment. For example, an investment in a property might have cash outflows for the purchase price, closing costs, and any renovations, and cash inflows from rent and eventual sale of the property. The IRR is the discount rate at which the NPV of the investment is equal to zero. There are many ways to calculate IRR, from simple spreadsheet functions to more complex financial modeling software. It\'s worth noting that IRR can be a bit tricky when it comes to projects that don\'t have a consistent cash flow over time. These types of investments are known as \"irregular cash flow\" and the IRR might be misleading or not suitable to calculate. There are other metrics to evaluate these investments such as Modified Internal Rate of Return (MIRR) which is a variation of IRR and is used to get more accurate results.
Students also viewed these Business questions
-
Consider an investment project with the following repeating cash flow pattern every four years forever: What is the annual-equivalence amount of this project at an interest rate of 14%? $100 $100...
-
Conoly Co. has identified an investment project with the following cash flows. If the discount rate is 5 percent, what is the present value of these cash flows? What is the present value at 13...
-
Island Fabricating Limited is contemplating an investment project with the following cash flows: Year Net Cash Flow ($ thousands) 0 ...............................(120,000) 1...
-
Using the SEDAR database, find the most recent annual reports for two Canadian retailers (e.g., Loblaw, Rona, Danier Leather). Required: a. Based on the information provided in the companies audited...
-
An air traffic controller observes two airplanes approaching the airport. The displacement from the control tower to plane 1 is given by the vector A(vector), which has a magnitude of 220 km and...
-
Construct a truth table for the statement. (~q p) ~ q
-
Aquatic Corporation manufactures water skis through two processes: Molding and Packaging. In the Molding Department fiberglass is heated and shaped into the form of a ski. In the Packaging...
-
Marc Smith's construction firm currently has three projects under way in various counties in Iowa. Each requires a specific supply of gravel. Three gravel pits are available in Iowa to provide for...
-
Recent development near Eugene, Oregon, has identified a need for improved access to Interstate 5 at one location. Civil engineers and public planners are considering three alternative access plans....
-
Warren Marina owns a large marina that contains numerous boat slips of various sizes. Warren contracts with boat owners to provide slips to house the customers boats. Lucky Fisher Fleet contracted...
-
Consider the following projects cash flows: n Cash Flow 0......-$3,000 1..........$800 2..........$900 3..............X Assume that the projects IRR is 10%. (a) Find the value of X. (b) Is this...
-
A corporation is considering purchasing a machine that will save $200,000 per year before taxes. The cost of operating the machine, including maintenance, is $80,000 per year. The machine, costing...
-
How large an angle in radians and degrees does the diameter of the Moon subtend to a person on the Earth?
-
Samantha and Rashida are planning a trip to Padre Island, Texas, during spring break. Members of the varsity volleyball team, they are looking forward to four days of beach volleyball and...
-
A mass m = 1 ?kg is attached to a spring of stiffness k = 2 0 0 N / m and a damper of constant b = 2 5 ?Ns / m , ?as shown below. Imagine a force of Fa = 3 ?N applied to the mass. Find the ODE...
-
The operating income based on Absorption costing of Omega Corporation is P8,000 higher than the operating income based on Variable costing. The unit product cost under variable costing and absorption...
-
solve this! step by step walkthrough preferred please. Home Meals On House- Total Nursing Wheels keeping Revenues... Variable expenses Contribution margin $900,000 $260,000 $400,000 $240,000 490,000...
-
Students must useinformation literacy in their writing. Theprojectshould be at least #2000 words of content. Word document only! The students will be required to meet with a top level manager,...
-
On January 1, 2018, Glover Corporation issued $2,400,000 of 5-year, 8% bonds at 95. The bonds pay interest annually on January 1. By January 1, 2020, the market rate of interest for bonds of risk...
-
Use this circle graph to answer following Exercises. 1. What fraction of areas maintained by the National Park Service are designated as National Recreation Areas? 2. What fraction of areas...
-
What kinds of businesses are most likely to benefit from wearable computers? Select a business and describe how a wearable computing device could help that business improve operations or decision...
-
What business benefits do cloud computing services provide? What problems do they solve?
-
What are the disadvantages of cloud computing ?
-
Nick's Novelties, Incorporated, is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $225,000, have a fifteen-year useful life, and...
-
6 3 Part 6 of 6 points Required information [The following information applies to the questions displayed below.] Munoz Company makes and sells products with variable costs of $24 each. Munoz incurs...
-
1. Set up the business using MYOB. 2. Create / Modify the chart of accounts. 3. Enter opening general ledger balances. 4. Set up Accounts Receivable (debtor) accounts, assign your chosen name and...
Study smarter with the SolutionInn App