Explore BrainMass
Share

# Internal Rate of Return (IRR)

### Calculate IRR

My company has an opportunity to make an investment of \$100,000 that will return \$33,000 in year 1, \$38,000 in year 2, \$43,000 in year 3, \$48,000 in year 4, and \$53,000 in year 5. My companyâ??s required return is 12%. What is the IRR and would it be acceptable or not?

### Investment NPV and IRR calculations

Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product is \$5 million. The product is expected to generate profits of \$1 million per year for 10 years. The company will have to provide product support expected to cost \$100000 per yr.in perpetuity. Assume all profits

### NPV and IRR

You are considering opening a new plant. The plant will cost \$100 million upfront. After that it is expected tp produce profits of \$30 million at the end of every year. The cash flows are expected to last forever. Calculate the NPv of this investment opportunity if your cost of capital is 8%. Should you make the investment? Calc

### Capital Budgeting

You are presented with a proposal for a project. The bottom line is that is claimed that if you invest 20 million in a project for this year, you will receive 5 million, 18 million, and 12 million over the following three years a. Set up a worksheet that will tell you both the net present value of this project assuming a 12%

### Calculating the Capital Investment

See the attachment. A. Warren Company plans to open a new repair service center for one of its electron products. The center requires an investment in depreciable assets costing \$480000. The asset will be depreciated on a straight-line basis, over four years, and have no expected salvage value. The annual income statement for t

### IRR and NPV - Basic Venture Economics

In the â??Basic Venture Economicsâ? example, what would be the entrepreneurâ??s IRR if the investor was given 10% of the firm in exchange for the \$250 investment? What would be the investor's IRR? If you were the investor, would you make the investment?

### Internal Rate of Return

Which of the following is the approximate internal rate of return for an investment that costs \$45,880 and provides a \$4,000 annuity for 20 years? a. 11% b. 6% c. 8% d. 10%

### Caledonia is considering two additional mutually exclusive projects.

Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows: YEAR PROJECT A PROJECT B 0 -\$100,000 -\$100,000 1 32,000 0 2 32,000 0 3 32,000 0 4 32,000 0 5

### Scale Differences: Pinkerton Publishing Company

The Pinkerton Publishing Company is considering two mutually exclusive expansion plans. Plan A calls for the expenditure of \$50 million on a large-scale, integrated plant that will provide an expected cash flow stream of \$8 million per year for 20 years. Plan B call for the expenditure of \$15 million to build a somewhat less e

### MCQ on Capital Budgeting

Can you help me get started with this assignment? 1. A project has an up-front cost of \$100,000. The project's WACC is 12 percent and its net present value is \$10,000. Which of the following statements is most correct? a. The project should be rejected since its return is less than the WACC. b. The pro

### Project analysis for new line of golf clubs: payback, NVP and IRR

A company that makes golf clubs is selling a new line of clubs. The clubs will sell for \$750 per set and have a variable cost of \$330 per set. The company has spent \$150,000 for a marketing study to determine they will sell 51,000 sets per year for 7 years. That marketing study also determined the company will lose sales of 11,

### Jones Company's new truck: Evaluate with IRR and NPV

Jones Company's new truck has a cost of \$20,000, and it will produce end-of-year net cash inflows of \$7,000 per year for 5 years. The cost of capital for an average-risk project like the truck is 8 percent. What is the project's IRR? Using the information above for IRR, if the required return is 12%, is the project acceptable

### Incremental IRR

You work for an outdoor play structure manufacturing company and are trying to decide between two projects: Year end cash flows (\$ thousands) Project 0 1 2 IRR Play house -30 15 20 10.40% Fort -80 39

### IRR in Firms Contemplating

Firm is contemplating the purchase of a new \$925,000 computer based order system. The system will be depreciated straight-line to zero over its five year life. It will be worth \$90,000 at the end of that time. You will save \$360,000 before taxes per year in order processing cost, and you will be able to reducr working capital by

### Service Deparment Costs, Cash Collection, Internal Rate of Return, Overhead Etc.

1) World Airlines has three service departments; ticketing, baggage handling and aircraft maintenance. Costs of these departments are allocated to two revenue producing departments, domestic and international flights. Costs for the service departments are not separated into fixed and variable and the totals are as follows: Ti

### Internal rate of return

One potential criticism of the internal rate of return technique is that there is an implicit assumption that this technique assumes the intermediate cash flows of the project are reinvested at the internal rate of return. In other words, if you calculate the future value of the intermediate cash flows to the end of the project

### Pro forma capital budget

I have the data needed to complete the pro forma capital budget, I just cant figure out how to do it. This is using part 1 of answers provided from a previous question (I will attach). Any help would be appreciated. The NPV.xls has the data needed to complete the problem. The pro forma budget.xls is the sheet in which the an

### Finding the Incremental IRR

You work for an outdoor play structure manufacturing company and are trying to decide between two projects: Year-end cash flows (\$ thousands) Project.................0...................1..............2...............IRR Playhouse .........-30.................15............20............10.4% Fort....................-80.

1. In the corporate form, the separated structure creates the potential for __________ between owners and managers. a. A conflict of interest b. Increased transactions costs c. Stability in relations d. None of the above 2. Incentive problems take a variety of forms. They include a. Moral hazard b. Adverse selection. c.

### Evaluate project using NPV and IRR. Is IRR the same as MIRR

Cash Flows Year CF 0 -450,000 1 165,000 2 190,000 3 205,000 4 183,000 The project is being evaluated in order to be completed in a fictitious country. All cash flows from a foreign country are "blocked" and must be reinvested with the government of a fictitious country for one year. The

### Rate of return .

An investment will pay you \$200 in one year and then pay annually forever. Each payment will be 3% larger than the previous one. If the investment costs \$2,500, what rate of return do you expect to earn?

### Final recommendations for Superior going public: hurdle rates, debt option, metrics

See attached files. Provide a final report to the CFO and CEO which encompasses financial pros and cons and final recommendations for Superior going public and the new production plant. Be sure to include a discussion on what hurdles rates the production plant project would not pass, the debt versus no debt option (associated

### Case Study: the firm is considering sponsoring a pavilion at the upcoming World's fair...

Project P, the firm is considering sponsoring a pavilion at the upcoming World's fair. The pavilion would cost \$800,000 and it is expected to result in \$5million o incremental cash inflows during its 1 year of operation. However, it would then take another year, and \$5million of cost, to demolish the sit and return it to its ori

### I have 20 questions.

I have 20 questions. Can someone please help with them? 12 are multiple choice and 8 are true/false. Thank you. David 1. Determining the maturity and type of funds raised in financial markets is part of the: A. Investment decision B. Capital budgeting decision C. Financing decision D. Both A & B 2. Which of t

### Capital Budgeting

Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows: Year Project A Project B 0 -\$100,000 -\$100,000 1 32,000 0 2 32,000 0 3 32,000 0 4 32,000 0 5

### Internal rate of return using interpolation

Elgin Restaurant Supplies is analyzing the purchase of manufacturing equipment that will cost \$20,000. The annual cash inflow for the next three years will be: Year cash flow 1 \$10,000 2 9,000 3 6,500 a. Determine the internal rate of return using interpolation. b. W

### Coupon Rate and the Required Return on a Bond

Coupon Rate: How does a bond issuer decide on the appropriate coupon rate to set on its bonds? Explain the difference between the coupon rate and the required return on a bond.

### Finance Multiple Choice: ratios, compound interest, growth rates, NPV, exchange rates

2. A firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio? a. Liquidity b. Leverage c. Efficiency d. Profitability 3. Kingsbury Associates has current assets as follows: Cash

### Pappas Products: use IRR or MIRR for project selection

Pappas Products is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO believes the IRR is the best selection criterion, while the CFO advocates the MIRR. If the decision is made by choosing the project with the higher IRR rather than

### Sample Finance Quiz

Need Help with sample quiz. Sample Finance Quiz 1. The ______ is the annual rate of interest earned on a security purchased on a given date and held to maturity. A. Term Structure B. Yield Curve C. Risk-free Rate D. Yield to maturity 2. If a new asset is being considered as a replacement for an old asset, the relevant