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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Suppose you derived the following information on the Private cash flows of a farming project. Year 0 1 2 3 4 5 Market Cash Flow Before Financing -3500 3000 1000 1000 -750 -750 1000 1000 1000 -750 -750 -750 Debt Financing Private Net Benefit After Financing -500 250 250 250 250 250 If the debt-to-equity ratio is 40:60, complete the following: The IRR on the Market is: The IRR on the Debt is: The IRR on Equity is: Provide your answers in percentage form (e.g. an interest of 5.2% should be entered as 5.20) to two decimal places. Do not include %. Marks will not be awarded if your answer is not to the correct two decimal places. Ensure you double check your Excel output to report as 2dp.
Transcribed Image Text:Suppose you derived the following information on the Private cash flows of a farming project. Year 0 1 2 3 4 5 Market Cash Flow Before Financing -3500 3000 1000 1000 -750 -750 1000 1000 1000 -750 -750 -750 Debt Financing Private Net Benefit After Financing -500 250 250 250 250 250 If the debt-to-equity ratio is 40:60, complete the following: The IRR on the Market is: The IRR on the Debt is: The IRR on Equity is: Provide your answers in percentage form (e.g. an interest of 5.2% should be entered as 5.20) to two decimal places. Do not include %. Marks will not be awarded if your answer is not to the correct two decimal places. Ensure you double check your Excel output to report as 2dp.
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