Principles of Finance Homework Chapter 08

| March 14, 2016

Consider the following cash flows:

Year Cash Flow
0 –$5,600
1 1,650
2 2,900
3 1,450
4 1,150

Required:

What is the payback period for the above set of cash flows? (Do not round intermediate calculations.Round your answer to 2 decimal places (e.g., 32.16).)

Payback period

years

A firm evaluates all of its projects by applying the IRR rule.

Year Cash Flow
0 –$ 155,000
1 61,000
2 78,000
3 62,000

Requirement 1:

What is the project’s IRR? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Internal rate of return %

Requirement 2:
If the required return is 13 percent, should the firm accept the project?

(Click to select)NoYes

Consider the following cash flows:

Year Cash Flow
0 –$ 32,000
1 13,700
2 18,000
3 11,100

Requirement 1:

What is the NPV at a discount rate of zero percent? (Do not round intermediate calculations.)

Net present value $

Requirement 2:

What is the NPV at a discount rate of 10 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Net present value $

Requirement 3:

What is the NPV at a discount rate of 20 percent? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.Round your answer to 2 decimal places (e.g., 32.16).)

Net present value $

Requirement 4:

What is the NPV at a discount rate of 30 percent? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)

Net present value $

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