Internal Rate of Return and Free Cash Flow
Not what you're looking for?
1) Determine to the nearest percent the IRR on the following projects:
A) An initial outlay of $ 10,000 resulting in a free cash flow of $ 2000 at the end of year 1, $ 5000 at the end of year 2, and $ 8,000 at the end of year 3.
B) An initial outlay of $ 10,000 resulting in a free cash flow of $ 8000 at the end of year 1, $ 5000 at the end of year 2, and $ 2000 at the end of year 3.
C) An initial outlay of $ 10,000 resulting in a free cash flow of $ 2000 at the end of years 1 through 5 and $ 5000 at the end of year 6.
2) Visible Fences is introducing a new product and has an expected change in EBIT of $ 900,000. Visible Fences has a 34% marginal tax rate. This project will also produce $ 300,000 of depreciation per year. In addition, in year 1 this project will also cause the following changes:
Without the Project With the project
Accounts Receivable $ 55,000 $ 63,000
Inventory 55,000 70,000
Accounts Payable 90,000 106,000
What is the project's free cash flow in year 1?
Purchase this Solution
Solution Summary
This solution calculates the internal rate of return and present value and determines the free cash flow of the project in year 1. All workings and formulas are shown in an Excel file.
Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
Recent Feedback
- "Your explanation to the answers were very helpful."
- "What does 1 and 0 means in the repair column?"
- "Went through all of the formulas, excellent work! This really helped me!"
- "try others as well please"
- "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.