Foundations of Financial Management
Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Chapter 12, Problem 24P

Davis Chili Company is considering an investment of $ 35,000, which produces the following inflows:

Chapter 12, Problem 24P, Davis Chili Company is considering an investment of  35,000, which produces the following inflows:

You are going to use the net present value profile to approximate the value for the internal rate of return. Please follow these steps:

a. Determine the net present value of the project based on a zero discount rate.

b. Determine the net present value of the project based on a 10 percent discount rate.

c. Determine the net present value of the project based on a 15 percent

discount rate (it will be negative).

d. Draw a net present value profile for the investment and observe the discount rate at which

the net present value is zero. This is an approximation of the internal rate of return based

on the procedure presented in this chapter.

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Foundations of Financial Management

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