ABC Ltd is listed on the ASX and has 15,000 shares outstanding that are currently trading at $35 each. It is an all equity firm. ABC has four independent business ventures under consideration, all with a risk level requiring a return of 12% pa. IRR NPV Venture W 8.9% -$4,356 Venture X 15.3% $9,730 Venture Y 23.5% $2,560 Venture Z 13.3% $8,550 (a) Which is the best business venture and why? (b) What is the effect on share price if all valuable ventures are accepted? "The internal rate of return is the same thing as the discount rate." Is this statement true or false? Explain.
ABC Ltd is listed on the ASX and has 15,000 shares outstanding that are currently trading at $35 each. It is an all equity firm. ABC has four independent business ventures under consideration, all with a risk level requiring a return of 12% pa. IRR NPV Venture W 8.9% -$4,356 Venture X 15.3% $9,730 Venture Y 23.5% $2,560 Venture Z 13.3% $8,550 (a) Which is the best business venture and why? (b) What is the effect on share price if all valuable ventures are accepted? "The internal rate of return is the same thing as the discount rate." Is this statement true or false? Explain.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Need help with a and b as well as the last question on whether the internal rate of return is the same as discount rate
Transcribed Image Text:ABC Ltd is listed on the ASX and has 15,000 shares outstanding that are currently trading at $35 each.
It is an all equity firm. ABC has four independent business ventures under consideration, all with a
risk level requiring a return of 12% pa.
IRR
NPV
Venture W
8.9%
-$4,356
Venture X
15.3%
$9,730
Venture Y
23.5%
$2,560
Venture Z
13.3%
$8,550
(a) Which is the best business venture and why?
(b) What is the effect on share price if all valuable ventures are accepted?
"The internal rate of return is the same thing as the discount rate." Is this statement true or false?
Explain.
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