Question

The net present value of a project is $260000 at the discount
rate of 14.0 percent. Which of the following could be the IRR of
this project?

a)11.6

b)12.29

c)11.6

d)11.96

e)16.6

Answer #1

The NPV of a project is the difference between the Present value of the future cash flows discounted at the rate of return and the initial cash outflow.

Also The IRR is the particular rate of return at which the NPV is zero

Now here when the rate of return is 14% the NpV is $260000

In order to reduce the NPv to zero we need to increase the discount rate so the present values of cash inflows will decrease sufficiently for the NPV to become zero.

So the IRR must be a rate above 14%

In the options only 16.6 is above 14%

So the correct choice is option e) 16.6

11.
The discount rate that makes the net present value of an
investment exactly equal to zero is the:
A)
Payback period.
B)
Internal rate of return.
C)
Average accounting return.
D)
Profitability index.
E)
Discounted payback period.
12.
The internal rate of return (IRR) rule can be best stated
as:
A)
An investment is acceptable if its IRR is exactly equal to its
net present value (NPV).
B)
An investment is acceptable if its IRR is exactly equal to...

What is the net present value of a project with the following
cash flows if the discount rate is 10 percent?
Year
0
1
2
3
4
Cash Flow -$32,000
$9,000 $10,000
$15,200 $7,800
A. $1,085.25
B. $1,193.77
C. $3,498.28
D. $4,102.86
E. $4,513.15

The internal rate of return is the discount rate at which the
net present value is Select one:
a. positive.
b. There is no relationship between these two concepts.
c. equal to zero.
d. negative.

9
the following are true/false
4)When the IRR serves as the discount rate, the net present
value =$0
14) The first step when solving for the modified IRR (MIRR) is
to calculate the present value of the cash inflows.
16) It is not fair to say that all capital budgeting methods
have an accept-reject criterion.
17) a project costing $1000 and returning $450 annually for
three will have a npv> $0 if the discount rate is =15%
18) If the...

Project A has an internal rate of return (IRR) of 15 percent.
Project B has an IRR of 14 percent. Both projects have a required
return of 12 percent. Which of the following statements is most
correct?
a.
Both projects have a positive net present value (NPV).
b.
Project A must have a higher NPV than project B.
c.
If the required return were less than 12 percent, Project B
would have a higher IRR than Project A.
d.
Project...

Calculate the Net Present Worth (or Net Present Value), and
benefit-cost (B/C) ratio of the following project, assuming an 8%
discount rate. Also determine the project’s Internal Rate of Return
(IRR).
Year
Cash Flow ($)
0
-400.00
5
-100.00
15
+500.00
30
+2,500.00

Project A has a net present value of $1,500, a payback period of
2 years, and an internal rate of return of 12%. Project
B has a net present value of $1,800, a payback period of 4 years,
and an internal rate of return of 10%. Project C has a
netpresent value of $1,750, a payback period of 3 years, and an
internal rate of return of 11%. If the projects are
mutually exclusive, which project should be undertaken?
A.
Project A because...

The
i thermal rate of return is:
The discount rate that makes the net present value of a
project equal to the initial cash outlay.
Equivalent to the discount rate that makes the net present
value equal to one.
Tedious to compute without the use of either a Financial
calculator or a computer.
Highly dependent upon the current interest rates offered in
the marketplace.
A better methodology than net present value when dealing with
unconventional cash flows.

Net present value _____________.
Select one:
a. Requires the firm set an arbitrary cutoff point for
determining whether an investment is acceptable
b. Is equal to zero when the discount rate used is less than the
IRR
c. Is simplified by the fact that future cash flows are easy to
estimate
d. Is equal to the initial investment in a project
e. Compares project cost to the present value of the project
benefits

Net Present Value Versus Internal Rate of Return
For discount factors use Exhibit 12B-1 and Exhibit 12B-2.
Skiba Company is thinking about two different modifications to
its current manufacturing process. The after-tax cash flows
associated with the two investments follow:
Year
Project I
Project II
0
$(100,000)
$(100,000)
1
—
63,857
2
134,560
63,857
Skiba's cost of capital is 12%.
Required:
1. Compute the NPV and the IRR for each
investment. Round present value calculations and your final NPV
answers...

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