Year Cash Flow (A) Cash Flow (B) 0 -$52,000 -$52,000 1 28,000 2 22,000 3 17,000 4 12,400 a-1. What is the IRR for each of these projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. If you apply the IRR decision rule, which project should the company accept? b-1. Assume the required return is 11 percent. What is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2. Which project will you choose of you apply the NPV decision rule? c-1. Over what range of discount rates would you choose Project A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. Over what range of discount rates would you choose Project B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d. a-1. Project A Project B a-2. b-1. Project A Project B b-2. c-1. Above C-2. Below d. Discount rate B 15,800 19,800 24,000 25,800 Project A $ $ Project B 22.83 % 21.16 % 11,679.44 12,848.21 % % %
Year Cash Flow (A) Cash Flow (B) 0 -$52,000 -$52,000 1 28,000 2 22,000 3 17,000 4 12,400 a-1. What is the IRR for each of these projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. If you apply the IRR decision rule, which project should the company accept? b-1. Assume the required return is 11 percent. What is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2. Which project will you choose of you apply the NPV decision rule? c-1. Over what range of discount rates would you choose Project A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c-2. Over what range of discount rates would you choose Project B? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) d. a-1. Project A Project B a-2. b-1. Project A Project B b-2. c-1. Above C-2. Below d. Discount rate B 15,800 19,800 24,000 25,800 Project A $ $ Project B 22.83 % 21.16 % 11,679.44 12,848.21 % % %
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
Solve c-1, c2, and d percentages.
Transcribed Image Text:Year Cash Flow (A) Cash Flow (B)
0
-$52,000
-$52,000
1
28,000
15,800
2
22,000
19,800
3
17,000
24,000
4
12,400
25,800
a-1. What is the IRR for each of these projects? (Do not round intermediate calculations and enter
your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
a-2. If you apply the IRR decision rule, which project should the company accept?
b-1. Assume the required return is 11 percent. What is the NPV for each of these projects? (Do not
round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
b-2. Which project will you choose of you apply the NPV decision rule?
c-1. Over what range of discount rates would you choose Project A? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
c-2. Over what range of discount rates would you choose Project B? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
At what discount rate would you be indifferent between these two projects? (Do not round
intermediate calculations and enter your answer as a percent rounded to 2 decimal places,
e.g., 32.16.)
d.
a-1. Project A
Project B
a-2.
b-1. Project A
Project B
b-2.
c-1. Above
c-2. Below
d.
Discount rate
Project A
$
$
Project B
22.83 %
21.16 %
11,679.44
12,848.21
%
%
%
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