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Net Cash Flows and NPVs for different discount rate for projects S and L are given below      Net Cash Flows ($)   Discount Rate (%) NPVS NPVL Year (t) Project S Project L   0% $800 $1100 0 $(3000) $(3000)   5 454.85 554.32 1 1500 400   10 161.33 108.59 2 1200 900   15 (90.74) (259.24) 3 800 1300   20 (309.03) (565.97) 4 300 1500   25         a) Calculate the discounted payback period in years at 10% for the Project S and Project L    i) Payback for Project S:   ii) Payback for Project L:     b) Calculate NPVS for 25% and NPVL for 25%. Fill the table   i) NPVS at 25%:     ii) NPVL at 25%:     c What is the IRR for S?   (Write down the equation for IRR and then Use an excel worksheet to calculate IRR  Equation:

Net Cash Flows and NPVs for different discount rate for projects S and L are given below      Net Cash Flows ($)   Discount Rate (%) NPVS NPVL Year (t) Project S Project L   0% $800 $1100 0 $(3000) $(3000)   5 454.85 554.32 1 1500 400   10 161.33 108.59 2 1200 900   15 (90.74) (259.24) 3 800 1300   20 (309.03) (565.97) 4 300 1500   25         a) Calculate the discounted payback period in years at 10% for the Project S and Project L    i) Payback for Project S:   ii) Payback for Project L:     b) Calculate NPVS for 25% and NPVL for 25%. Fill the table   i) NPVS at 25%:     ii) NPVL at 25%:     c What is the IRR for S?   (Write down the equation for IRR and then Use an excel worksheet to calculate IRR  Equation:

Essentials Of Investments
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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Net Cash Flows and NPVs for different discount rate for projects S and L are given below 

 

 

Net Cash Flows ($)

 

Discount Rate (%)

NPVS

NPVL

Year (t)

Project S

Project L

 

0%

$800

$1100

0

$(3000)

$(3000)

 

5

454.85

554.32

1

1500

400

 

10

161.33

108.59

2

1200

900

 

15

(90.74)

(259.24)

3

800

1300

 

20

(309.03)

(565.97)

4

300

1500

 

25

 

 

 

 

  1. a) Calculate the discounted payback period in years at 10% for the Project S and Project L 

 

i) Payback for Project S:

 

ii) Payback for Project L:

 

 

  1. b) Calculate NPVS for 25% and NPVL for 25%. Fill the table

 

i) NPVS at 25%:

 

 

ii) NPVL at 25%:

 

 

c What is the IRR for S?   (Write down the equation for IRR and then Use an excel worksheet to calculate IRR 

Equation:

 

Answer:

 

  1. d) What is the IRR for L? (Write down the equation for IRR and then Use an excel worksheet to calculate IRR 

Equation:

 

Answer:

 

 

  1. e) What is the cross-over rate? (Write down the equation for cross-over rate and then Use an excel worksheet to calculate IRR

Equation:

 

Answer:

 

  1. f) If projects are mutually exclusive, which project would you accept?

i) at 10%

ii) at 25%

  1. g) If projects are independent (not mutually exclusive), which project(s) would you accept?

i) at 10%

 ii) at 25%

 

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