Question

NPV profile of a project. Given the following cash flow of Project​ L-2, draw the NPV...

NPV profile of a project. Given the following cash flow of Project​ L-2, draw the NPV profile. Hint​: Be sure to use a discount rate of zero for one intercept ​(y​-axis) and solve for the IRR for the other intercept ​(x​-axis).

Year 0= -​$240,000

Year 1= ​$44,000

Year 2= ​$79,000

Year 3= $112,000

Year 4= ​$136,000

What is the NPV of Project​ L-2 where zero is the discount​ rate?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Given

Cash flow

Year 0=-240000

Year 1=44000

Year 2=79000

Year 3=112000

Year 4=136000

Where CF=Cash flow

r=discount rate

t=year in which cash flow occur

Discount rate r NPV
0% 131000
5% 82197.44
10% 42326.34
15% 9396.48
20% -18070.99
25% -41190.40

from above graph we find that IRR is 17% where NPV=0

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the statements below is true? a. The graphic plot of project NPV against discount...
Which of the statements below is true? a. The graphic plot of project NPV against discount rate is called the NPV profile b. NPV profile is always downward sloping, i.e., NPV decreases with higher discount rate c. At the intercept point of the NPV profile with the horizontal axis, the project IRR is zero. d. All of the above e. None of the above
6. Understanding the NPV profile If projects are mutually exclusive, only one project can be chosen....
6. Understanding the NPV profile If projects are mutually exclusive, only one project can be chosen. The internal rate of return (IRR) and the net present value (NPV) methods will not always choose the same project. If the crossover rate on the NPV profile is below the horizontal axis, the methods will 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...
The Basics of Capital Budgeting: NPV Profile A project's NPV profile graph intersects the Y-axis at...
The Basics of Capital Budgeting: NPV Profile A project's NPV profile graph intersects the Y-axis at 0% cost of capital and intersects the X-axis at the project's -Select-paybackMIRRIRRCorrect 1 of Item 1 (where NPV = 0). The Y-axis intersection point represents the project's undiscounted NPV. The point at which 2 projects' profiles cross one another is the crossover rate. The crossover rate can be found by calculating the -Select-IRRpaybackMIRRCorrect 2 of Item 1 of the differences in the projects' cash...
For the following project, calculate: (a) NPV at the end of the project (discount rate 15%)...
For the following project, calculate: (a) NPV at the end of the project (discount rate 15%) (b) IRR at the end of the project. Year (n) 0 1 2 3 4 Capex -$600,000 - - - - Income - $200,000 $200,000 $200,000 $200,000 Undiscounted cash flow P/F (15%) Discounted cash flow IRR - - - - *P/F is the discount factor, converting a future value into a present value
Consider the following two mutually exclusive projects: Year 0 Cash Flow(X) - $19,200 Cash Flow(Y) -$19,200...
Consider the following two mutually exclusive projects: Year 0 Cash Flow(X) - $19,200 Cash Flow(Y) -$19,200 Year 1 Cash Flow(X) 8,650 Cash Flow(Y) 9,700 Year 2 Cash Flow(X) 8,700 Cash Flow(Y) 7,600 Year 3 Cash Flow (X) 8,600 Cash Flow (Y) 8,500 A.) Calculate the IRR for each project. Project X ___% Project Y ___% B.) What is the crossover rate for these two projects? C.) What is the NPV of Projects X and Y at discount rates of 0...
Assuming a project having the following cash flows: Year 0 1 2 3 4 Cash flow...
Assuming a project having the following cash flows: Year 0 1 2 3 4 Cash flow -6000 500 -500 5000 3000 What is the NPV of this project if the discount rate is 5%? Report the answer with 2 numbers after decimal place What is the IRR of this project? Report the answer in percentage term with 2 numbers after decimal place such as 12.43%. What discount rate will make NPV of this project equals to -494.258 Report the answer...
The large furniture retailer "Sofa So Good" is evaluating two mutually exclusive projects: NPV versus IRR....
The large furniture retailer "Sofa So Good" is evaluating two mutually exclusive projects: NPV versus IRR. Consider the following projects where the firms may only choose one not both: The firm's cost of capital/required return equals 9%. NOTE: The firm's cost of capital K, acts as a hurdle rate, and is based on the costs involved in financing other firm projects. The Cost of capital allows us to decide to accept or reject an investment, using IRR, which additionally allows...
Answer Question 1-3 Project A has the following projected cash flows: Year           Cash Flow 0                -11,23
Answer Question 1-3 Project A has the following projected cash flows: Year           Cash Flow 0                -11,235 1                4,400 2                4,400 3                4,400 4                4,400 5                7,400 Q1) The NPV of the above project is $_____. Assume a discount rate of 6%. a)9541 b)20776 c)17623 d)6388 Q2) The IRR for the above project is __ %. a)21.09 b)26.76 c)33.95 d)31.25 Q3)Which of the following statement is correct? a)If the discount rate increases, the IRR will decrease. b)If the discount rate increases, the NPV will stay the same. c)If...
Consider the following two mutually exclusive projects: Year Cash Flow (Project I) Cash Flow (Project II)...
Consider the following two mutually exclusive projects: Year Cash Flow (Project I) Cash Flow (Project II) 0 -$12,300 -$44,000 1 $1,800 $14,000 2 $6,000 $30,000 3 $2,000 $5,000 4 $5,000 $10,000 5 $7,000 $5,000 The required return is 10% for both projects. Assume that the internal rate of return (IRR) of Project I and Project II is 18% and 15%, respectively. a) Which project will you choose if you apply the NPV criterion? Why? b) Which project will you choose...
Given the following cash flows for a capital project, calculate the NPV and IRR. The required...
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%
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT