Explore BrainMass

Explore BrainMass

    Calculating IRR and YTM

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    I am having difficulty finding the correct formula for calculating the yield to maturity and internal rate of return. I am not a finance major and find this very difficult

    Could you do problems 6-20 and 6-38 orn give a hint on how to complete?

    (See attached file for full problem description)

    Here are the cash flows for two mutually exclusive projects:

    Project C0 C1 C2 C3
    A ($20,000) $8,000 $8,000 $8,000
    B ($20,000) 0 0 $25,000

    a. At what interest rates would you prefer project A to B?

    b. What is the IRR of each project?

    Growth Enterprises believes its latest project, which will cost $80,000 to install, will generate a perpetual
    growing stream of cash flows. Cash flow at the end of this year will be $5,000 and cash flows in future
    years are expected to grow indefinitely at an annual rate of 5 percent.

    a. If the discount rate for this project is 10 percent, what is the project NPV?

    b. What is the project IRR?

    © BrainMass Inc. brainmass.com December 15, 2020, 11:45 am ad1c9bdddf


    Solution Preview

    6-20 NPV is the summation of discounted cash inflows and the initial investment. The formula to use for calculating NPV is use the NPV function to get the discounted sum of cash inflows and add the initial investment to get the NPV. Using this formula the NPV profile ...

    Solution Summary

    The solution explains how to calculate internal rate of return and yield to maturity