Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 4, Problem 26PS
DCF and
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3.
follows:
Carnegie Corp. projects an annual cash flow for one of its divisions as
Year
0
1
2
3
4
5
6
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3
0
-10
2
2
2
2
What is the IRR for this cash flow stream? Try plotting the NPV as a function of
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Average Rate of Return Method, Net Present Value Method, and Analysis for a service company
The capital investment committee of Arches Landscaping Company is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows:
Front-End Loader
Year
1
2
3
4
5
Total
Year
1
2
3
4
5
6
7
Operating
Income
8
9
10
$54,000
54,000
54,000
54,000
54,000
$270,000
0.943
Each project requires an investment of $600,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis.
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6%
0.890
0.840
0.792
0.747
0.705
0.665
0.627
0.592
0.558
10%
Net Cash
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0.909
0.826
0.751
$172,000
172,000
172,000
172,000
172,000
$860,000
12%
0.893
0.797
0.756
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0.658
0.683
0.636
0.572
0.621 0.567 0.497
0.564
0.507
0.513
0.467
0.424
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0.404
15%
0.361
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0.870
0.432
0.376
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Chapter 4 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 4 - True/false True or false? a. All stocks in an...Ch. 4 - Dividend discount model Respond briefly to the...Ch. 4 - Dividend discount model Company X is expected to...Ch. 4 - Dividend discount model Company Y does not plow...Ch. 4 - Constant-growth DCF model Company Zs earnings and...Ch. 4 - Dividend discount model Company Z-prime is like Z...Ch. 4 - Dividend discount model If company Z (see Problem...Ch. 4 - Prob. 8PSCh. 4 - Prob. 9PSCh. 4 - Free cash flow Under what conditions does r, a...
Ch. 4 - Prob. 11PSCh. 4 - Prob. 12PSCh. 4 - Horizon value Suppose the horizon date is set at a...Ch. 4 - Stock quotes Go to finance.yahoo.com and get...Ch. 4 - Two-stage DCF model Consider the following three...Ch. 4 - Constant-growth DCF model Pharmecology just paid...Ch. 4 - Two-stage DCF model Company Qs current return on...Ch. 4 - Cost of equity capital Each of the following...Ch. 4 - Growth opportunities Alpha Corps earnings and...Ch. 4 - Prob. 23PSCh. 4 - Two-stage DCF model Compost Science Inc. (CSI) is...Ch. 4 - DCF and free cash flow Permian Partners (PP)...Ch. 4 - DCF and free cash flow Construct a new version of...Ch. 4 - Valuing a business Mexican Motors market cap is...Ch. 4 - Valuing Tree cash flow Phoenix Corp. faltered in...Ch. 4 - Constant-growth DCF formula The constant-growth...Ch. 4 - DCF valuation Portfolio managers are frequently...Ch. 4 - Valuing a business Construct a new version of...
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