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Internal Rate of Return (IRR)

IRR Calculations Using NPV and EAA

NPV at 16% = $385,236(PVIFA16%, 5yrs) - 1,080,000 = $385,236(3.2743) - 1,080,000 = $181,378.23 EAA = $181,378.23/(PVIFA16%, 5yrs) = $181,378.23/3.2743 = $55,394.51 How can I use above information to calculate the IRR?

Add-on loan

After visiting several automobile dealerships, Richard selects the used car he wants. He likes its $10,000 price,but financing through the dealer is no bargain. He has $2,000 cash for a down payment, so he needs an $8,000 loan. In shopping at several banks for an installment loan, he learns that most interest on automobile loans

Capital investment projects

A company has $40 million to invest in any or all of the four capital investment projects, which have cash flows as shown below. Year of Cash Flow Project Type of cash flow Yr 0 Yr 1 Yr 2 Yr 3 A Investment ($10,000) Revenue $21,000 Operating expenses $11,000 B Investment ($10,000) Revenue

Cornwallis, Inc.

A bond issued by Cornwallis, Inc. 15 years ago has a coupon rate of 7% and a face value of $1,000. The bond will mature in 10 years. What is the value (to the nearest dollar) to an investor with a required return of 10%? Alaska Power Company issued $1,000 bonds that have an annual coupon rate of 7.5%. The present market value o

Managerial accounting

1-A project's net present value, ignoring income taxes, is affected by: a- the net book value of an asset that is replaced. b- the depreciation on an asset that is replaced. c- the depreciation to be taken on assets used directly on the project. d- proceeds from the sale of

IRR and After Tax IRR

You are considering two mutually exclusive alternatives to perform a specific task. Machine A costs $150,000 and machine B costs $200,000. The first year costs for A are $1,000 and $500 for B. These costs are expected to rise at a rate of 10% per year for the 10 year study period. Both machines qualify as 5 year MACRS (GDS)

Internal rate of control

You are evaluating purchasing the rights to a project that will generate after tax expected cash flows of $90,000 at the end of each of the next five years, plus an additional $1,000,000 at the end of the fifth year as the final cash flow. You can purchase this project for $950,000. At this price, what rate of return would you

Economic Profit and NPV for Steele Electronics

Economic Profit and NPV Steele Electronics is considering an investment in a new component that requires a $100,000 investment in new capital equipment, as well as additional net working capital. The investment is expected to provide cash flows over the next five years. The anticipated earnings and project free cash flows for

Please assist with finding the formulas for the following:

(Hint: Table 7.5 on page 279 and the discussion regarding that table in your text should be extremely helpful in completing this case study.) Bethesda Mining is a mid sized coal mining company with 20 mines located in Ohio, Pennsylvania, West Virginia, and Kentucky. The company operates deep mines as well as strip mines.

The final two mutually exclusive projects for Caledonia

13. The final two mutually exclusive projects that Caledonia is considering involve mutually exclusive pieces of machinery that perform the same task. The two alternatives available provide the following set of after-tax net cash flows: YEAR EQUIPMENT A EQUIPMENT B 0 -$100,000 -$100,000 1 65,000 32,500 2 65,000 32,500 3 65,

IRR

Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table. The firm's cost of capital is 15% Project X Project Y Initial investment $500,000 $

Internal rate of return

3. Bagel Pantry Inc. is considering the following two projects. The company's cost of capital is 12%. The projected cash flows are summarized as follows: Time Project A Project B 0 $(25,000) $(23,000) 1 14,742 6,641 2 14,742 6,641 3 14,742 6,641 4 6,641 5 6,641

Cash Flows: Calculating the IRR

You are considering an investment in a project with a life of eight years, an initial outlay of $120,000, and annual after-tax cash flows of $52,000. The project also requires an increase in inventories of $22,000. This $22,000 investment in inventory is required at the outset of the project and will be released when the project

Calculating IRR

Calculate the IRR for the following cash flows. Is the project acceptable if the firm's cost of capital is 12%? End of Year Cash Flow ($) 0 - $400,000 1 100,000 2 200,000 3 300,000

Calculating Internal Rate of Return in MS Excel

For each of the projects shown in the following table, calculate the internal rate of return (IRR). Intial Cash Outflow Prjct A Prjct B Prjct C Prjct D $72,000 440,000 18,000 215,00 Inflows in year 1 16,000 135,000 7,000 108,00

interest rate - car purchase

Can you help me get started with this assignment? You are shopping for a car and read the following advertisement in the newspaper: "Own a new car. No money down. Four annual payments of just $10,000." You have shopped around and know that you can buy the car for cash for $32,500. What is the interest rate the dealer is

Construction of a New Plant: Internal Rate of Return

As the capital budgeting director for my company, I am evaluating construction of a new plant. The plant has a net cost of $5 million in Year 0 (today), and it will provide net cash flows of $1 million at the end of Year 1, $1.5 million at the end of Year 2, and $2 million at the end of Years 3 through 5. Within what range is th

IRR and mutally exclusive projects

ABC company is analyzing two mutually exclusive projects, X and Y, whose cash flows are shown below: Years 0 r = 12% 1yr 2yr 3yr X -1,100 1,000 350 50 Y -1,100 0 300 1,500 The company's cost of capital is 12 percent, and it can get an unlimited amount of capital at that cost. W

Required Rate of return : key information

Parr Paper's stock has a beta of 1.40, and its required return is 13.00%. Clover Dairy's stock has a beta of 0.80. If the risk-free rate is 4.00%, what is the required rate of return on Clover's stock? (Hint: First find the market risk premium.)

Net present value and internal rate of return methods

Company want to buy a machine for 66,000. The annual cash flow have the following projections Year Cash flow 1 21,000 2 29,000 3 36,000 4 16,000 5 8,000 If the cost of capital is 10 percent what is the net present value? What is the internal rate of return?

Internal Rate of Return (IRR) - Warner Business Products

Warner Business Products is considering the purchase of a new machine at a cost of $11,070. The machine will provide $2,000 per year in cash flow for eight years. Warner's cost of capital is 13 percent. Using the internal rate of return method, evaluate this project and indicate whether it should be undertaken.

What is the internal rate of return for Bau Long-Haul, Inc.?

Question 11: (1 point) (Ignore income taxes in this problem.) Bau Long-Haul, Inc., is considering the purchase of a tractor-trailer that would cost $308,325, would have a useful life of 6 years, and would have no salvage value. The tractor-trailer would be used in the company's hauling business, resulting in additional net cas

Multiple Choice Questions in finance: cost of capital, cost of debt, cost of equity, capital structure weights, WACC, debt-equity ratio, preferred stock, rate of return, pure play approach, beta, net present value, discount rate

1. A firm's overall cost of capital: d. varies inversely with its cost of debt. a. is unaffected by changes in the tax rate. e. is another term for the firm s internal rate of return. b. is the same as the firm s return on equity. c. is the required return on the total assets of a firm. 2.

Payout stock price, calculate ratios, growth rate, merger facts

8. Cash Dividends. The stock of Payout Corp. will go ex-dividend tomorrow. The dividend will be $0.50 per share, and there are 20,000 shares of stock outstanding. The market-value balance sheet for Payout is shown on the following table. Assets Liabilities and Equity Cash $100,000 Equity $1,000,000 Fixed Assets $900,000

Given cost and cash flows, what is NPV, IRR

An investment has a total installed cost of $5,346. The cash flows over the four year life of the investment are projected to be $1,459, $2,012, $2,234, and $1,005. a) If the discount rate is zero, what is the NPV? b) If the discount rate is infinity, what is the NPV? c) What is the IRR on the investment? d) Based on th

Monocle Enterprise: IRR for two mutually exclusive investment

Mr. Polly Femus, the president of Monocle Enterprise, is evaluating the following two mutually exclusive investments: Cash Flows C0 C1 C2 Project A -$400 $241 $293 Project B - 200 131 172 a) Determine the IRR for each. b) If Mr. Femus chooses the project with the higher IRR, under what circumstances will h