Question

Internal rate of return For the project shown in the following table, calculate the internal rate of return

(IRR). Then indicate, for the project, the maximum cost of capital that the firm could have and still find the IRR acceptable.

Initial investment $160,000

Year (t) Cash inflows

1 $35,000

2 $25,000

3 $45,000

4 $45,000

5 $45,000

The project's IRR is?

The maximum cost of capital that the firm could have and still find the IRR acceptable is?

Answer #1

Cash Flows:

Year 0 = -$160,000

Year 1 = $35,000

Year 2 = $25,000

Year 3 = $45,000

Year 4 = $45,000

Year 5 = $45,000

Let IRR be i%

NPV = -$160,000 + $35,000/(1+i) + $25,000/(1+i)^2 +
$45,000/(1+i)^3 + $45,000/(1+i)^4 + $45,000/(1+i)^5

0 = -$160,000 + $35,000/(1+i) + $25,000/(1+i)^2 + $45,000/(1+i)^3 +
$45,000/(1+i)^4 + $45,000/(1+i)^5

Using financial calculator, i = 6.50%

The project’s IRR is 6.50%

The maximum cost of capital that the firm could have and still find
the IRR acceptable is 6.50%

Internal rate of return For the project shown
in the following table, calculate the internal rate of
return
(IRR). Then indicate, for the project, the
maximum cost of capital that the firm could have and still find the
IRR acceptable.
The project's IRR is %. (Round to two decimal places.)
Initial investment
(CF
0CF0)
$110,000
Year
(t)
Cash inflows
(CF Subscript
tCFt)
1
$25,000
2
$50,000
3
$30,000
4
$35,000
5
$10,000

For the project shown in the following table,
calculate the internal rate of return (IRR). Then indicate,
for the project, the maximum cost of capital that the firm could
have and still find the IRR acceptable.
Initial investment
(CF 0CF0)
$80,000
Year
(t)
Cash inflows
(CF Subscript tCFt)
1
$25,000
2
$45,000
3
$30,000
4
$30,000
5
$15,000

Internal rate of return For the project shown in the following
table,
LOADING...
, calculate the internal rate of return
(IRR).
Then indicate, for the project, the maximum cost of capital that
the firm could have and still find the IRR acceptable.
The project's IRR is
nothing %.
(Round to two decimal places.)
Initial investment
(CF 0CF0)
$120 comma 000120,000
Year
(t)
Cash inflows
(CF Subscript tCFt)
1
$20 comma 00020,000
2
$35 comma 00035,000
3
$45 comma 00045,000
4...

Internal rate of return. For each of the projects shown in the
following table, calculate the internal rate of return (IRR). Then
indicate, for each project, the maximum cost of capital that the
firm could have and still find the IRR acceptable.
Project A
Project B
Project C
Project D
Initial investment
-$90,000
-$490,000
-$20,000
-$240,000
Year
Cash inflows
1
$20,000
$150,000
$7,500
$120,000
2
25,000
150,000
7,500
100,000
3
30,000
150,000
7,500
80,000
4
35,000
150,000
7,500
60,000
5...

Find the internal rate of return (IRR) for the following
project. The project requires an initial investment of $ 11 comma
000 and provides 5 annual cash inflows of $ 29 comma 200 . Assume a
cost of capital of 7.8 % .

Billabong Tech uses the internal rate of return (IRR)
to select projects. Calculate the IRR for each of the following
projects and recommend the best project based on this measure.
Project T-Shirt requires an initial investment of $18,167 and
generates cash inflows of $8,500 per year for 55 years. Project
Board Shorts requires an initial investment of $28,000 and produces
cash inflows of $11,500 per year for 66 years.
The IRR of project T-Shirt is _____ (Round to two decimal...

4. Internal rate of return (IRR) The internal rate of return
(IRR) refers to the compound annual rate of return that a project
generates based on its up-front cost and subsequent cash flows.
Consider the case of Blue Llama Mining Company: Blue Llama Mining
Company is evaluating a proposed capital budgeting project (project
Sigma) that will require an initial investment of $800,000. The
company has been basing capital budgeting decisions on a project’s
NPV; however, its new CFO wants to...

Which of the following statements is true about the internal
rate of return (IRR)?
a.If the IRR is less than the required rate of return, the firm
is indifferent between accepting or rejecting the investment
proposal.
b.If the IRR is greater than the required rate, the project is
deemed acceptable.
c.If the IRR is less than the required rate of return, the
project is deemed acceptable.
d.If the IRR is greater than the required rate of return, the
firm is...

Which of the following statements defines the internal rate of
return (IRR) for a project?
A. Discount rate which results in a zero NPV
B. Discount rate which results in a NPV equal to the project's
initial cost
C. Rate of return required by the project's investors
D. The current market rate of return for projects of similar
risk

A firm with a cost of capital of 10% is evaluating two
independent projects utilizing the internal rate of return
technique. Project X has an initial investment of $70,000 and cash
inflows at the end of each of the next five years of $25,000.
Project Z has an initial investment of $120,000 and cash inflows at
the end of each of the next four years of $35,000. The firm should
________.
accept Project X and reject project Z
accept both...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 10 minutes ago

asked 21 minutes ago

asked 24 minutes ago

asked 42 minutes ago

asked 53 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago