Green Tree Industries uses the IRR rule to evaluate projects. A potential investment in fixed assets will require an initial investment of $162,000. Over the next three years, it will deliver positive Cash Flows of $54,000, $85,000, and $69,000. a. What is the project's IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 12.34.) Internal rate of return b. If the required return is 12%, should the firm accept the project? (Enter either Yes or No) b. If the required retum is 12%, should the firm accept the project? (Yes or No) c. What is the formula, from your formula sheet used to calculate the IRR? (Enter the number used to calculate a. from the formula sheet) c. What is the formula, from your formula sheet used to calculate the IRR? Vstraight-line Years 6 Sensitivity _ Variable ANPV A variable AOCF 7 Sensitivity _ Variable - A variable 10 n n CFt NPV = (1 + R) t=0 0 = CFt (1 + IRR) IRR = Rate Low + (NPV Low)(Rate High Ratelow) (NPV, "High t=0 - NPV Low 13 R= D1 Po= (R-g) D+ + g Po= R Dividend Yield: DPR EPSE Po Price/share 16 PE = Earnings 17 P-S = Price/share Sales 18 Sales S/S = # shares outstanding 19 Earnings (Revenue - Cost) EPS = # shares outstanding 20 EPS = DPRE Price = Benchmark PE ratio x EPS 21 Price = Benchmark P-S ratio x Sales/Sharet 22 25 27 1 (1+r) n 23 PVA - PMT PVAD: PMT (1 + r) PVp=[PM PVA |(1+r) -1 24 FVA - PMT MT 26 FVAD: PMT (4=r)" (1 + r) PMT = 28 r (1+r)n r 29 Current Yield = 1- Annual Coupon Price (PO) 30 PBond = 0 F (1+YTM) YTM 31 (1+R) = (1+r)(1+h) (1+YTM) FV 32 FV = PV(1+r) PV = r-(E)- -1 ta In (FV) In (1+r) (1+r)' 33 34 35