Question
The following table shows the forecast cash flows for two projects: C0 C1 C2 C3 C4 C5 A $1,060 $26 $26 $26 $26 $1,248 B
The following table shows the forecast cash flows for two projects: C0 C1 C2 C3 C4 C5 A $1,060 $26 $26 $26 $26 $1,248 B 1,060 68 68 1,080 Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the following table: t 1 2 3 4 5 rt 4.0% 4.5% 5.0% 5.5% 6.0%
a-1. Calculate the IRR on the two projects.
a-2. Calculate the NPV on the two projects.
a-3. Do the two measures give the same ranking for the two projects?
The following table shows the forecast cash flows for two projects: Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the following table: a-1. Calculate the IRR on the two projects. a-2. Calculate the NPV on the two projects. a-3. Do the two measures give the same ranking for the two projects Step by Step Solution
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The Complete Direct Investing Handbook
Authors: Kirby Rosplock
1st Edition
1119094712, 978-1119094715
