rest dollar and round IRR percentages to one decimal place (for example, 15.68% rounds to 15.7% and should be entered as "15.7" in the answer box). System 1 System 2 NPV $ $ IRR % % 2. Why is the project with the larger NPV the correct choice for the company
rest dollar and round IRR percentages to one decimal place (for example, 15.68% rounds to 15.7% and should be entered as "15.7" in the answer box). System 1 System 2 NPV $ $ IRR % % 2. Why is the project with the larger NPV the correct choice for the company
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
Related questions
Question
100%
NPV Versus
Year System I System II
0 $(120,000) $(120,000)
1 - 76,628
2 162,708 76,628
The company’s cost of capital is 10 percent. The present value tables provided in Exhibit 19B.1
and Exhibit 19B.2 must be used to solve the following problems.
Required:
1. Compute the NPV and the IRR for each investment. If required, round intermediate calculations and NPV to the nearest dollar and round IRR percentages to one decimal place (for example, 15.68% rounds to 15.7% and should be entered as "15.7" in the answer box).
System 1 System 2
NPV $ $
IRR % %
2. Why is the project with the larger NPV the correct choice for the company?
Transcribed Image Text:EXHIBIT 19B.2
Periods 2%
1
2
3
4
5
6
8
9
DHZBHRFN28
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
29
30
4%
*P₁ = (1/1) × [1-1/(1+0.
Present Value of an Annuity of $1 in Arrears*
6%
8%
10%
12% 14% 16% 18%
20%
22% 24%
26% 28%
30% 32%
40%
2.168
2.263
2.331
2.379
2.414
2.438
2.456
1.690
2.402
3.037
3.605
5.601 5.242 4.917
4.111
6.472 6.002 5.582 5.206 4.868 4.564
7.325 6.733 6.210 5.747 5.335 4.968
8.162 7.435 6.802 6.247 5.759 5.328
8.983 8.111 7.360 6.710 6.145 5.650
9.787 8.760 7.887 7.139 6.495 5.938
10.575 9.385 8.384 7.536 6.814 6.194
11.348 9.986 8.853 7.904 7.103 6.424
12.106 10.563 9.295 8.244 7.367 6.628
12.849 11.118 9.712 8.559 7.606 6.811
13.578 11.652 10.106 8.851 7.824 6.974
14.292 12.166 10.477 9.122 8.022 7.120
14.992 12.659 10.828 9.372 8.201 7.250
15.678 13.134 11.158 9.604 8.365 7.366
16.351 13.590 11.470 9.818 8.514 7.469
17.011 14.029 11.764 10.017 8.649 7.562
17.658 14.451 12.042 10.201 8.772 7.645
18.292 14.857 12.303 10.371
10.371 8.883 7.718
18.914 15.247 12.550 10.529 8.985 7.784
19.523 15.622 12.783 10.675 9.077 7.843
20.121 15.983 13.003 10.810 9.161 7.896
20.707 16.330 13.211 10.935 9.237 7.943
21.281 16.663 13.406 11.051
11.051 9.307 7.984
21.844 16.984 13.591 11.158 9.370 8.022
22.396 17.292 13.765 11.258 9.427 8.055
0.980 0.962 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.806 0.794 0.781 0.769 0.758
0.714
1.942 1.866 1.833 1.783
1.736
1.647 1.605 1.566 1.528 1.492 1.457 1.424 1.392 1.361 1.331 1.224
2.884 2.775 2.673 2.577 2.487
2.322 2.246 2.174 2.106 2.042 1.981 1.923 1.868 1.816 1.766
1.589
3.808 3.630 3.465 3.312 3.170
2.914 2.798 2.690 2.589 2.494 2.404 2.320 2.241 2.166 2.096 1.849
4.713 4.452 4.212 3.993 3.791
3.433 3.274 3.127 2.991 2.864 2.745 2.635 2.532 2.436 2.345 2.035
4.623 4.355
3.889 3.685 3.498 3.326 3.167 3.020 2.885
2.759 2.643 2.534
4.288 4.039 3.812 3.605 3.416 3.242 3.083 2.937 2.802 2.677
4.639 4.344 3.078 3.837
3.619 3.421 3.241 3.076 2.925 2.786
4.946 4.607 4.303 4.031 3.786 3.566 3.366 3.184 3.019 2.868
5.216 4.833 4.494 4.192 3.923 3.682 3.465 3.269 3.092 2.930
5.453 5.029 4.656 4.327 4.035 3.776 3.543 3.335 3.147 2.978
5.660 5.197 4.793 4.439 4.127 3.851 3.606 3.387 3.190 3.013
5.842 5.342 4.910 4.533 4.203 3.912 3.656 3.427 3.223 3.040
6.002 5.468 5.008 4.611 4.265 3.962 3.695 3.459 3.249 3.061
6.142 5.575 5.092 4.675 4.315 4.001 3.726 3.483 3.268 3.076
6.265 5.668 5.162 4.730 4.357 4.033 3.751 3.503 3.283 3.088
6.373 5.749 5.222 4.775 4.391 4.059 3.771 3.518 3.295 3.097
6.467 5.818 5.273 4.812 4.419 4.080 3.786 3.529 3.304 3.104 2.494
6.550 5.877 5.316 4.843 4.442 4.097 3.799 3.539 3.311 3.109 2.496
6.623 5.929 5.353 4.870 4.460 4.110 3.808 3.546 3.316 3.113
2.497
6.687 5.973 5.384 4.891 4.476 4.121 3.816 3.551 3.320 3.116
6.743 6.011 5.410 4.909 4.488 4.130 3.822 3.556 3.323 3.118
6.792 6.044 5.432 4.925 4.499 4.137 3.827 3.559 3.325 3.120
6.835 6.073 5.451 4.937 4.507 4.143 3.831 3.562 3.327 3.121
6.873 6.097 5.467 4.948 4.514 4.147 3.834 3.564 3.329 3.122
6.906 6.118 5.480 4.956 4.520 4.151 3.837 3.566 3.330 3.123
6.935 6.136 5.492 4.964 4.524 4.154 3.839 3.567 3.331 3.123
6.961 6.152 5.502 4.970 4.528 4.157 3.840 3.568 3.331 3.124 2.500
6.983 6.166
5.510
4.975 4.531 4.159 3.841 3.569 3.332 3.124 2.500
7.003 6.177 5.517 4.979 4.534 4.160 3.842 3.569 3.332 3.124 2.500
2.469
2.478
2.484
2.489
2.492
2.498
2.498
2.499
2.500
2.499
2.499
2.500
Transcribed Image Text:EXHIBIT 19B.1
1
2
Periods 2%
20% 22% 24% 26% 28%
0.769 0.758
0.592 0.574
0.455 0.435
0.714
0.510
0.364
0.350 0.329
0.006
0.980 0.962 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.806 0.794 0.781
0.961 0.925 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 0.672 0.650 0.630 0.610
0.942 0.889 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 0.551 0.524 0.500 0.477
0.924 0.855 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 0.451 0.423 0.397 0.373
0.260
0.906 0.822 0.747 0.681 0.621 0.567 0.519 0.476 0.437 0.402 0.370 0.341 0.315 0.291 0.269 0.250 0.186
0.888 0.790 0.705
0.636 0.564 0.507 0.456 0.410 0.370 0.335 0.303 0.275 0.250 0.227 0.207 0.189 0.133
0.871 0.760 0.665 0.583 0.513 0.452
0.400 0.354 0.314 0.279 0.249 0.222 0.198 0.178 0.159 0.143 0.095
0.853 0.731 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 0.204 0.179 0.157 0.139 0.123 0.108 0.068
0.837 0.703 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 0.167 0.144 0.125 0.108 0.094 0.082
0.048
0.820 0.676 0.558 0.463 0.386 0.322 0.270 0.227 0.191 0.162 0.137 0.116 0.099 0.085 0.073 0.062 0.035
0.804 0.650 0.527 0.429 0.350 0.287 0.237 0.195 0.162 0.135 0.112 0.094 0.079 0.066 0.056 0.046 0.025
0.788 0.625 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 0.092 0.076 0.062 0.052 0.043 0.036 0.018
0.773 0.601 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 0.075 0.061 0.050 0.040 0.033 0.027 0.013
0.758 0.577 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 0.062 0.049 0.039 0.032 0.025 0.021 0.009
0.743 0.555 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.065 0.051 0.040 0.031 0.025 0.020 0.016
0.728 0.534 0.394 0.292 0.218 0.163 0.123 0.093 0.071 0.054 0.042 0.032 0.025 0.019 0.015 0.012
0.714 0.513 0.371 0.270 0.198 0.146 0.108 0.080 0.060 0.045 0.034 0.026 0.020 0.015 0.012 0.009
0.350 0.250 0.180 0.130 0.095 0.069 0.051 0.038 0.028 0.021 0.016 0.012 0.009 0.007
0.331 0.232 0.164 0.116 0.083 0.060 0.043 0.031 0.023 0.017 0.012 0.009 0.007 0.005
0.312 0.215 0.149 0.104 0.073 0.051 0.037 0.026 0.019 0.014 0.010 0.007 0.005 0.004
0.294 0.199 0.135 0.093 0.064 0.044 0.031 0.022 0.015 0.011 0.008 0.006 0.004 0.003
0.278 0.184 0.123 0.083 0.056 0.038 0.026 0.018 0.013 0.009 0.006 0.004 0.003 0.002
0.262 0.170 0.112 0.074 0.049 0.033 0.022 0.015 0.010 0.007 0.005 0.003 0.002 0.002
0.102 0.066 0.043 0.028 0.019 0.013 0.008 0.006 0.004 0.003 0.002 0.001
0.059 0.038 0.024 0.016 0.010 0.007 0.005 0.003 0.002 0.001 0.001
0.598 0.361 0.220 0.135 0.084 0.053 0.033 0.021 0.014 0.009 0.006 0.004 0.002 0.002 0.001 0.001
0.586 0.347 0.207 0.125 0.076 0.047 0.029 0.018 0.011 0.007 0.005 0.003 0.002 0.001 0.001 0.001
0.574 0.333 0.196 0.116 0.069 0.042 0.026
0.016 0.010 0.006 0.004 0.002 0.002 0.001 0.001 0.000
0.563 0.321 0.185 0.107 0.063 0.037 0.022 0.014 0.008 0.005 0.003 0.002 0.001 0.001 0.000 0.000
0.552 0.308 0.174 0.099 0.057 0.033 0.020 0.012 0.007
0.004 0.003 0.002 0.001 0.001 0.000 0.000
0.005
0.003
0.700
0.002
0.494
0.475
0.686
0.002
0.673
0.456
0.001
0.660
0.439
0.647
0.422
0.634 0.406
0.622 0.390 0.247 0.158
0.001
0.001
0.000
0.000
0.000
0.610 0.375 0.233
0.146
0.092
3456789 PINETAN
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Present Value of $1*
4%
6%
8%
10%
12%
14% 16% 18%
30%
32%
40%
0.000
0.000
0.000
0.000
0.000
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