Question
1.The cash flows for three independent projects are found below: a.Calculate the IRR for each of the projects. b.If the discount rate for all three
1.The cash flows for three independent projects are found below:
a.Calculate the IRR for each of the projects.
b.If the discount rate for all three projects is 26 percent, which project or projects would you want to undertake?
c.What is the net present value of each of the projects where the appropriate discount rate is 26 percent?
| Project A | Project B | Project C | |||||
| Year 0 (Initial investment) | $(45,000) | $(95,000) | $(400,000) | ||||
| Year 1 | $11,000 | $29,000 | $230,000 | ||||
| Year 2 | 16,000 | 29,000 | 230,000 | ||||
| Year 3 | 19,000 | 29,000 | 230,000 | ||||
| Year 4 | 26,000 | 29,000 | |||||
| Year 5 | 31,000 | 29,000 | |||||
2. Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $11,300,000, and the project would generate cash flows of $1,150,000 per year for 20 years. The appropriate discount rate is 6.7 percent.
a. Calculate the NPV.
b. Calculate the PI.
c. Calculate the IRR.
d. Should this project be accepted? Why or why not?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Day Trading Advanced Strategies
Authors: Andrew Pemberton
1st Edition
979-8682050369
