PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 10, Problem 27PS
Summary Introduction
To discuss: Whether it is worth to pay test.
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Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of
this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5
years, respectively.
Time:
Cash flow:
0
4
-$5,000 $1,200 $2,400 $1,600 $1,600 $1,400
Use the IRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final onswer to 2 decimal
places.)
Answer is complete but not entirely correct.
IRR
6
$1,200
14.00 %
Suppose your firm is considering investing in a project with the cash flows shown
below, that the required rate of return on projects of this risk class is 9 percent, and that
the maximum allowable payback and discounted payback statistics for the project are
3.5 and 4.5 years, respectively.
Time:
Cash flow:
0
-$15, 200
MIRR
1
$3,000
3
2
$4,200 $3,400
Use the MIRR decision rule to evaluate this project. (Do not round intermediate
calculations and round your final answer to 2 decimal places.)
%
5
$3,400 $3,200
6
$3,000
Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Use the IRR decision to evaluate this project; should it be accepted or rejected?
Time
0
1
2
3
4
5
6
Cash Flow
–$
5,000
$
1,200
$
1,400
$
1,600
$
1,600
$
1,100
$
2,000
Chapter 10 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 10 - Terminology Match each of the following terms to...Ch. 10 - Project analysis True or false? a. Sensitivity...Ch. 10 - Sensitivity analysis Otobais staff (see Section...Ch. 10 - Prob. 4PSCh. 10 - Prob. 7PSCh. 10 - Scenario analysis What is the NPV of the electric...Ch. 10 - Prob. 9PSCh. 10 - Break-even analysis Break-even calculations are...Ch. 10 - Prob. 11PSCh. 10 - Prob. 12PS
Ch. 10 - Prob. 13PSCh. 10 - Break-even analysis A financial analyst has...Ch. 10 - Fixed and variable costs In a slow year, Deutsche...Ch. 10 - Operating leverage You estimate that your cattle...Ch. 10 - Prob. 17PSCh. 10 - Prob. 20PSCh. 10 - Real options Explain why options to expand or...Ch. 10 - Prob. 22PSCh. 10 - Real options True or false? a. Decision trees can...Ch. 10 - Prob. 24PSCh. 10 - Real options An auto plant that costs 100 million...Ch. 10 - Decision trees Look back at the Vegetron electric...Ch. 10 - Prob. 27PSCh. 10 - Prob. 28PSCh. 10 - Prob. 29PSCh. 10 - Prob. 32PS
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