Question

Calculate the NPV, IRR and the Modified IRR using all three
methods and the cash flows below. The

reinvestment rate/required rate is **11%**.

YEAR 0 1 2 3 4 5

ORIGINAL CASH FLOW"S -12,000 2,400 6,000 -5,000 -3,000 24,000

Answer #1

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Calculate the NPV, IRR and the Modified IRR using all three
methods and the cash flows below. The
reinvestment rate/required rate is 11%. Do not use
excel. May use HP 10llb+ calculator but show steps.
YEAR 0 1 2 3 4 5
ORIGINAL CASH FLOWS -12,000 ; 2,400 ; 6,000 ; -5,000 ; -3,000 ;
24,000

. Calculate the IRR and NPV for the following cash flows. Assume
a 15% discount rate
Year
Project 1
Cash flow
Project 2
Cash flow
0
-$20,000
-$20,000
1
1,000
12,000
2
3,000
15,000
3
4,000
3,000
4
12,000
4,000
5
15,000
1,000
9. If your tenant pays you rent of $24,000 a year for 10 years,
what is the present value of the series of payments discounted at
10% annually?
10. You are going to invest $300,000 in a...

Given the following cash flows for a capital project, calculate
the NPV and IRR. The required rate of return is 8 percent.
Year
0
1
2
3
4
5
Cash Flows
$-37004
$11550
$12750
$16800
$10700
$5350
NPV=4947. IRR=18.0%
NPV=4947. IRR=9.9%
NPV=9464. IRR=9.9%
NPV=9464. IRR=18.0%

LO 3 LO 4 7.
Calculating NPV and IRR. A project that provides annual cash
flows of $2,620 for eight years costs $9,430 today. Is this a good
project if the required return is 8 percent? What if it's 24
percent? At what discount rate would you be indifferent between
accepting the project and rejecting it?
LO 4 9.
Calculating NPV. For the cash flows in the previous problem,
what is the NPV at a discount rate of...

Given the cash flows below, calculate the NPV, the NPVI Ratio,
the IRR and the Equivalent Annual Value of the project using a
9% pa cost of capital. Ignore inflation and taxes.
Show all your working and explain your processes.
0 -20000
1 9000
2 8000
3 9100
4 9000
5 6000

If mutually exclusive projects with normal cash flows are being
analyzed, the net present value (NPV) and internal rate of return
(IRR) methods agree.
Projects Y and Z are mutually exclusive projects. Their cash
flows and NPV profiles are shown as follows.
Year
Project Y
Project Z
0
–$1,500
–$1,500
1
$200
$900
2
$400
$600
3
$600
$300
4
$1,000
$200
If the weighted average cost of capital (WACC) for each project
is 14%, do the NPV and...

Solo Corp. is evaluating a project with the following cash
flows: Year Cash Flow
0 –$12,400
year
cash flow
0
- $12,400
1
$5,900
2
$6,200
3
$5,900
4
$4,800
5
-$4,400
The company uses a disount rate of 11 percent and a reinvestment
rate of 8 percent on all of its projects. Calculate the MIRR of the
project using all three methods using these interest rates
. a. MIRR using the discounting approach.
b. MIRR using the reinvestment approach....

4. Modified internal rate of return (MIRR)
The IRR evaluation method assumes that cash flows from the
project are reinvested at the same rate equal to the IRR. However,
in reality the reinvested cash flows may not necessarily generate a
return equal to the IRR. Thus, the modified IRR approach makes a
more reasonable assumption other than the project’s IRR.
Consider the following situation:
Cold Goose Metal Works Inc. is analyzing a project that requires
an initial investment of $500,000....

Modified internal rate of return (MIRR)
The IRR evaluation method assumes that cash flows from the
project are reinvested at the same rate equal to the IRR. However,
in reality the reinvested cash flows may not necessarily generate a
return equal to the IRR. Thus, the modified IRR approach makes a
more reasonable assumption other than the project’s IRR.
Consider the following situation:
Fuzzy Button Clothing Company is analyzing a project that
requires an initial investment of $500,000. The project’s...

A firm evaluates all of its projects by using the NPV decision
rule.
Year
Cash
Flow
0
–$31,000
1
21,000
2
12,000
3
5,000
a. At a required return of 15 percent, what is
the NPV for this project?
b. At a required return of 40 percent, what is
the NPV for this project?

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