Whether IRR can be used to rank projects without having to mention a discount rate.

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Answer 1

Question

Chapter 5, Problem 3PS

a)

Summary Introduction

To discuss: Whether IRR can be used to rank projects without having to mention a discount rate.

b)

Summary Introduction

To discuss: That in case of the payback period method as long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects and it reduces risk.

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4. On August 20, Mr. and Mrs. Cleaver decided to buy a property from Mr. and Mrs. Ward for $105,000. On August 30, Mr. and Mrs. Cleaver obtained a loan commitment from OKAY National Bank for an $84,000 conventional loan at 5 percent for 30 years. The lender informs Mr. and Mrs. Cleaver that a $2,100 loan origination fee will be required to obtain the loan. The loan closing is to take place September 22. In addition, escrow accounts will be required for all prorated property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr. and Mrs. Cleaver inspect the uniform settlement statement as required under RESPA on September 21, is as follows: I. Transactions between buyer-borrower and third parties: a. Recording fees--mortgage b. Real estate transfer tax c. Recording fees/document…

Answer 2

Question

Chapter 5, Problem 3PS

a)

Summary Introduction

To discuss: Whether IRR can be used to rank projects without having to mention a discount rate.

b)

Summary Introduction

To discuss: That in case of the payback period method as long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects and it reduces risk.

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Answer 3

Question

Chapter 5, Problem 3PS

a)

Summary Introduction

To discuss: Whether IRR can be used to rank projects without having to mention a discount rate.

b)

Summary Introduction

To discuss: That in case of the payback period method as long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects and it reduces risk.

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Answer 4

Question

Chapter 5, Problem 3PS

a)

Summary Introduction

To discuss: Whether IRR can be used to rank projects without having to mention a discount rate.

b)

Summary Introduction

To discuss: That in case of the payback period method as long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects and it reduces risk.

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Answer 5

Chapter 5, Problem 3PS

a)

Summary Introduction

To discuss: Whether IRR can be used to rank projects without having to mention a discount rate.

b)

Summary Introduction

To discuss: That in case of the payback period method as long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects and it reduces risk.

Answer 6

Chapter 5, Problem 3PS

a)

Summary Introduction

To discuss: Whether IRR can be used to rank projects without having to mention a discount rate.

Answer 7

Chapter 5, Problem 3PS

a)

Summary Introduction

To discuss: Whether IRR can be used to rank projects without having to mention a discount rate.

Answer 8

b)

Summary Introduction

To discuss: That in case of the payback period method as long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects and it reduces risk.

Answer 9

b)

Summary Introduction

To discuss: That in case of the payback period method as long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects and it reduces risk.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 5 - (IRR) Check the IRRs for project F in Section 5-3.Ch. 5 - (IRR) What is the IRR of a project with the...Ch. 5 - (XIRR) What is the IRR of a project with the...Ch. 5 - Payback a. What is the payback period on each of...Ch. 5 - Payback Consider the following projects: a. If the...Ch. 5 - Prob. 3PS Ch. 5 - IRR Write down the equation defining a projects...Ch. 5 - Prob. 5PS Ch. 5 - IRR Calculate the IRR (or IRRs) for the following...Ch. 5 - IRR rule You have the chance to participate in a...

Whether IRR can be used to rank projects without having to mention a discount rate.

Solution Summary: The author explains that IRR is a modern or discounted capital budgeting technique in which the company should compare the internal rate of return (IRR) with the opportunity cost of capital.

To discuss: Whether IRR can be used to rank projects without having to mention a discount rate.

To discuss: That in case of the payback period method as long as the minimum payback period is short, the rule makes sure that the company takes no borderline projects and it reduces risk.

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Chapter 5 Solutions