The following table shows the forecast cash flows for two projects: C₁ C4 C5 $28 $28 $1,264 74 A B It Co -$1,080 -1,080 Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the Following table: Req A1 C₂ $28 74 t IRRA IRRB 1 2 3 4.0% 4.5% 5.0% Req A2 a-1. Calculate the IRR on the two projects. a-2. Calculate the NPV on the two projects. a-3. Do the two measures give the same ranking for the two projects? $28 1,090 Complete this question by entering your answers in the tabs below. 4 5.5% 5.20 % % 5 6.0% Req A3 Calculate the IRR on the two projects. Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
The following table shows the forecast cash flows for two projects: C₁ C4 C5 $28 $28 $1,264 74 A B It Co -$1,080 -1,080 Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the Following table: Req A1 C₂ $28 74 t IRRA IRRB 1 2 3 4.0% 4.5% 5.0% Req A2 a-1. Calculate the IRR on the two projects. a-2. Calculate the NPV on the two projects. a-3. Do the two measures give the same ranking for the two projects? $28 1,090 Complete this question by entering your answers in the tabs below. 4 5.5% 5.20 % % 5 6.0% Req A3 Calculate the IRR on the two projects. Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
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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Transcribed Image Text:The following table shows the forecast cash flows for two projects:
C₁
C3
C₁
C5
Co
-$1,080 $28
-1,080
$28
$1,264
74
A
B
It
Now suppose that the term structure is upward sloping and investors demand a higher return on the more distant flows as in the
following table:
1
4.0%
Req A1
2
4.5%
IRRA
IRRB
C₂
$28
74
t
Req A2
3
5.0%
a-1. Calculate the IRR on the two projects.
a-2. Calculate the NPV on the two projects.
a-3. Do the two measures give the same ranking for the two projects?
$28
1,090
Complete this question by entering your answers in the tabs below.
4
5.5%
5.20 %
%
5
6.0%
Req A3
Calculate the IRR on the two projects.
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
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