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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

 

554.32

1

1500

400

 

10

161.33

 

2

1200

900

 

15

(90.74)

(259.24)

3

800

1300

 

20

(309.03)

(565.97)

4

300

1500

 

 

 

 

 

 

  1. a) Calculate the payback period in years for the Project S and Project L 

 

  1. i) Payback for Project S:

 

  1. ii) Payback for Project L:

 

 

  1. c) Calculate NPVS for 5% and NPVL for 10%. Fill the table 

 

  1. i) NPVS at 5%:

 

 

  1. ii) NPVS at 10%:

 

 

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

Equation:

 

Answer:

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