Adequate information: Year Cash Flows 0 $8,700 1 -$3,900 2 -$2,900 3 -$2,300 4 -$1,800 To compute: The internal rate of return (IRR) of the offer. Introduction: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

Question

Want to see the full answer?

Answer 1

Question

Chapter 5, Problem 10QAP

a.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute: The internal rate of return (IRR) of the offer.

Introduction: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

b.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 10%

To determine: Whether the offer should be accepted if the appropriate discount rate is 10%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

c.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 20%

To compute: Whether the offer should be accepted if the appropriate discount rate is 20%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

d.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute:

The net present value (NPV) of the offer if the appropriate discount rate is 10%.

The net present value (NPV) of the offer if the appropriate discount rate is 20%.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

e.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To explain: Whether the decisions under the NPV rule are consistent with those of the IRR rule.

Introduction:

The Internal Rate of Return (IRR) is the discount rate that will equate the present value of the cash inflows to the present value of the cash outflows.

The Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows of a proposal.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

I mistakenly submitted blurr image please don't answer . comment please i will write values.

Assume that the following statements of financial position are stated and a book value. Alpha Corporation Current Assets $15,000 Current Liabilities $5,400 Net Fixed Assets 39,000 Long-Term Debt 10,100   Equity 38,500     $54,000   $54,000 Beta Corporation Current Assets $3,600 Current Liabilities $1,400 Net Fixed Assets 6,700 Long-Term Debt 2,100     Equity 6,800   $10,300   $10,300 Suppose the fair market value of Beta’s fixed assets is $9,500 rather than the $6,700 book value shown. Alpha pays $17,300 for Beta and raises the needed funds through an issue of long-term debt. Construct the post-merger statement of financial position now, assuming that the purchase method of accounting is used.

The shareholders of Barley Corporation have voted in favor of a buyout offer from Wheat Corporation. Information about each firm is given here: Barley Wheat Price/earnings ratio 13.5 21 Shares outstanding 90,000 210,000 Earnings $180,000 $810,000 Barley shareholders will receive one share of Wheat stock for every three shares they hold of Barley. Required What will the EPS of Wheat be after the merger? What will be the P/E ratio if the NPV of the acquisition is 0? What must Wheat feel is the value of the synergy between these two firms? Explain how your answer can be reconciled with the decision to go ahead with the takeover?

Answer 2

Question

Chapter 5, Problem 10QAP

a.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute: The internal rate of return (IRR) of the offer.

Introduction: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

b.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 10%

To determine: Whether the offer should be accepted if the appropriate discount rate is 10%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

c.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 20%

To compute: Whether the offer should be accepted if the appropriate discount rate is 20%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

d.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute:

The net present value (NPV) of the offer if the appropriate discount rate is 10%.

The net present value (NPV) of the offer if the appropriate discount rate is 20%.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

e.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To explain: Whether the decisions under the NPV rule are consistent with those of the IRR rule.

Introduction:

The Internal Rate of Return (IRR) is the discount rate that will equate the present value of the cash inflows to the present value of the cash outflows.

The Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows of a proposal.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 5, Problem 10QAP

a.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute: The internal rate of return (IRR) of the offer.

Introduction: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

b.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 10%

To determine: Whether the offer should be accepted if the appropriate discount rate is 10%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

c.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 20%

To compute: Whether the offer should be accepted if the appropriate discount rate is 20%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

d.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute:

The net present value (NPV) of the offer if the appropriate discount rate is 10%.

The net present value (NPV) of the offer if the appropriate discount rate is 20%.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

e.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To explain: Whether the decisions under the NPV rule are consistent with those of the IRR rule.

Introduction:

The Internal Rate of Return (IRR) is the discount rate that will equate the present value of the cash inflows to the present value of the cash outflows.

The Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows of a proposal.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 5, Problem 10QAP

a.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute: The internal rate of return (IRR) of the offer.

Introduction: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

b.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 10%

To determine: Whether the offer should be accepted if the appropriate discount rate is 10%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

c.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 20%

To compute: Whether the offer should be accepted if the appropriate discount rate is 20%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

d.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute:

The net present value (NPV) of the offer if the appropriate discount rate is 10%.

The net present value (NPV) of the offer if the appropriate discount rate is 20%.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

e.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To explain: Whether the decisions under the NPV rule are consistent with those of the IRR rule.

Introduction:

The Internal Rate of Return (IRR) is the discount rate that will equate the present value of the cash inflows to the present value of the cash outflows.

The Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows of a proposal.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 5, Problem 10QAP

a.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute: The internal rate of return (IRR) of the offer.

Introduction: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

b.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 10%

To determine: Whether the offer should be accepted if the appropriate discount rate is 10%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

c.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 20%

To compute: Whether the offer should be accepted if the appropriate discount rate is 20%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

d.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute:

The net present value (NPV) of the offer if the appropriate discount rate is 10%.

The net present value (NPV) of the offer if the appropriate discount rate is 20%.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

e.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To explain: Whether the decisions under the NPV rule are consistent with those of the IRR rule.

Introduction:

The Internal Rate of Return (IRR) is the discount rate that will equate the present value of the cash inflows to the present value of the cash outflows.

The Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows of a proposal.

Answer 6

Chapter 5, Problem 10QAP

a.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute: The internal rate of return (IRR) of the offer.

Introduction: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

Answer 7

Chapter 5, Problem 10QAP

a.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute: The internal rate of return (IRR) of the offer.

Introduction: Internal rate of return (IRR) is defined as the discount rate at which the aggregate present value of net cash inflows is equal to the aggregate present value of net cash outflows of the project.

Answer 8

b.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 10%

To determine: Whether the offer should be accepted if the appropriate discount rate is 10%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

Answer 9

b.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 10%

To determine: Whether the offer should be accepted if the appropriate discount rate is 10%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

Answer 10

c.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 20%

To compute: Whether the offer should be accepted if the appropriate discount rate is 20%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

Answer 11

c.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

Appropriate discount rate = 20%

To compute: Whether the offer should be accepted if the appropriate discount rate is 20%.

Introduction: Internal rate of return refers to the discount rate at which the net present value of the project is zero.

Answer 12

d.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute:

The net present value (NPV) of the offer if the appropriate discount rate is 10%.

The net present value (NPV) of the offer if the appropriate discount rate is 20%.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Answer 13

d.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To compute:

The net present value (NPV) of the offer if the appropriate discount rate is 10%.

The net present value (NPV) of the offer if the appropriate discount rate is 20%.

Introduction: Net present value is defined as the summation of the present value of cash inflows in each period minus the summation of the present value of cash outflow.

Answer 14

e.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To explain: Whether the decisions under the NPV rule are consistent with those of the IRR rule.

Introduction:

The Internal Rate of Return (IRR) is the discount rate that will equate the present value of the cash inflows to the present value of the cash outflows.

The Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows of a proposal.

Answer 15

e.

Summary Introduction

Adequate information:

Year Cash Flows
0 $8,700
1 -$3,900
2 -$2,900
3 -$2,300
4 -$1,800

To explain: Whether the decisions under the NPV rule are consistent with those of the IRR rule.

Introduction:

The Internal Rate of Return (IRR) is the discount rate that will equate the present value of the cash inflows to the present value of the cash outflows.

The Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows of a proposal.

Answer 16

Expert Solution & Answer

Answer 17

Expert Solution & Answer

Answer 18

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 19

Ch. 5 - Payback Period and Net Present Value If a project...Ch. 5 - Net Present Value Suppose a project has...Ch. 5 - Comparing Investment Criteria Define each of the...Ch. 5 - Payback and Internal Rate of Return A project has...Ch. 5 - Prob. 5CQ Ch. 5 - Capital Budgeting Problems What are some of the...Ch. 5 - Prob. 7CQ Ch. 5 - Prob. 8CQ Ch. 5 - Net Present Value versus Profitability Index...Ch. 5 - Internal Rate of Return Projects A and B have the...

Solution Summary: The author calculates the internal rate of return (IRR) of the offer by using the Excel IRR function.

Want to see the full answer?

Chapter 5 Solutions

Year	Cash Flows
0	$8,700
1	-$3,900
2	-$2,900
3	-$2,300
4	-$1,800