When applying NPV and IRR methods to evaluate potential projects, both require use of a discount...
When applying NPV and IRR methods to evaluate potential projects, both require use of a discount rate. What is the discount rate used for NPV and IRR, respectively?
A) Cost of equity; cost of capital
B) IRR; cost of capital
C) Cost of capital; cost of capital
D) Cost of capital; IRR
Homework Answers
Hi
NPV (Net Present Value) of the project tell us that at the given cost of capital whether it is feasible to take the project or not.
If at given cost of capital NPV is positive then we should accept the project.
So NPV uses Cost of Capital
IRR is the rate in which NPV os a project equal to zero. It is used to determine the cost of capital above which project will be feasible. So discount rate used is also used in IRR.
so option C is correct answer here.
Thanks
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When applying NPV and IRR methods to evaluate potential
projects, both require use of a discount...
When applying NPV and IRR methods to evaluate potential projects, both require use of a discount...
When applying NPV and IRR methods to evaluate potential projects, both require use of a discount rate. What is the discount rate used for NPV and IRR, respectively? Group of answer choices IRR; cost of capital Cost of capital; IRR Cost of capital; cost of capital Cost of equity; cost of capital
6. If IRR and NPV give different answers, you should to discount future cash a. use...
6. If IRR and NPV give different answers, you should to discount future cash a. use IRR always b. use NPV always c. Use IRR if mutually exclusive projects d. use IRR if independent projects 7. If you are expressing all cash flows in future dollars, you use the The Innominal restro a. The IRR interest rate b. The nominal interest rate c. The real interest rate d. The corrected interest rate multiple assumptions to see how it affects NPV...
6. If IRR and NPV give different answers a. use IRR always b. use NPV always...
6. If IRR and NPV give different answers a. use IRR always b. use NPV always c. Use IRR if mutually exclusive projects d. use IRR if independent projects 7. If you are expressing all cash flows in future dollars, you use the to discount future cash fiows a. The IRR interest rate b. The nominal interest rate c. The real interest rate d. The corrected interest rate multiple assumptions to see how it affects NPV is an example of
If the projects were independent, which project(s) would be accepted according to the IRR method? a)...
If the projects were independent, which project(s) would be
accepted according to the IRR method?
a) Neither
b) Project A
c) Project B
d) Both Projects A or B
If the projects were mutually exclusive, which project(s) would
be accepted according to the IRR method?
a) Neither
b) Project A
c) Project B
d) Both Projects A or B
The reason is
a) TheNPV and IRR approaches use the same reinvestment rate
assumption and so both approaches reach the same...
8.11 NPV versus IRR Consider the following cash flows on two mutually exclusive projects for the...
8.11 NPV versus IRR Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 14 percent. Main Page Year Deepwater Fishing New Submarine Ride Incremental (Ride-Fishing) 0 $(850,000.00) $(1,650,000.00) $(800,000.00) 1 $320,000.00 $810,000.00 $490,000.00 2 $470,000.00 $750,000.00 $280,000.00 3 $410,000.00 $690,000.00 $280,000.00 Discount Rate IRR NPV As a financial analyst for BRC, you are asked the following questions: a. If your decision rule is to accept the...
Please use Excel to solve. NPV and IRR for Mutually Exclusive Projects 10. A company is...
Please use Excel to solve.
NPV and IRR for Mutually Exclusive Projects 10. A company is considering two mutually exclusive projects, A and B. Project A requires an initial investment of $200, followed by cash flows of $185, $40, and $15. Project B requires an initial investment of $200, followed by cash flows of S0, $50, and $230. What is the NPV and IRR for each of the projects? Which project should the company choose? The firm's cost of capital...
Calculating IRR and NPV
(Calculating IRR and NPV) (Related to Checkpoint 11.1 on page 367 and Checkpoint 11.4 on page 376) The cash flows for three independent projects are as follows:a. Calculate the IRR for each of the projects.b. If the discount rate for all three projects is 10 percent, which project or projects would you want to undertake?c. What is the NPV of each of the projects where the appropriate discount rate is 10 percent? 20 percent?
Imagine that two mutually exclusive projects have yielded NPV, PI, and IRR estimations as shown in...
Imagine that two mutually exclusive projects have yielded NPV, PI, and IRR estimations as shown in the table below: Decision Method Project SDX Project TGL NPV $2,100.87 $2,099.13 PI 1.68 1.44 IRR 14.56% 19.76% Suppose that the minimum required rate of return is 10.00% for both projects. Based on the capital budgeting decision methods presented in the data table above, determine the better alternative project to invest in. Group of answer choices 1) Project TGL 2)Project SDX 3)Neither one of...
why is for the calculation of NPV various methods are used? like sometimes it is like...
why is for the calculation of NPV various methods are used? like
sometimes it is like the NPV of a project is determined by dividing
the given cash flows for the year by given WACC whereas on the
contrary, NPV is calculated by multiplying the given cash flows
with present value factors? this sounds a bit crazy as well but i
am confused. so can you please explain this?
aptal budgeting and cash flow estimation Internal Rate of Return (IRR)...
1. The most popular capital budgeting techniques used in practice to evaluate and select projects are...
1. The most popular capital budgeting techniques used in practice to evaluate and select projects are payback period, Net Present Value (NPV), and Internal Rate of Return (IRR). 2. Payback period is the number of years required for a company to recover the initial investment cost. 3. Net Present Value (NPV) technique: NPV is found by subtracting a project’s initial cost of investment from the present value of its cash flows discounted using the firm’s weighted average cost of capital....
6. If IRR and NPV give different answers, you should to discount future cash a. use IRR always b. use NPV always c. Use IRR if mutually exclusive projects d. use IRR if independent projects 7. If you are expressing all cash flows in future dollars, you use the The Innominal restro a. The IRR interest rate b. The nominal interest rate c. The real interest rate d. The corrected interest rate multiple assumptions to see how it affects NPV...
6. If IRR and NPV give different answers a. use IRR always b. use NPV always c. Use IRR if mutually exclusive projects d. use IRR if independent projects 7. If you are expressing all cash flows in future dollars, you use the to discount future cash fiows a. The IRR interest rate b. The nominal interest rate c. The real interest rate d. The corrected interest rate multiple assumptions to see how it affects NPV is an example of
If the projects were independent, which project(s) would be
accepted according to the IRR method?
a) Neither
b) Project A
c) Project B
d) Both Projects A or B
If the projects were mutually exclusive, which project(s) would
be accepted according to the IRR method?
a) Neither
b) Project A
c) Project B
d) Both Projects A or B
The reason is
a) TheNPV and IRR approaches use the same reinvestment rate
assumption and so both approaches reach the same...
Please use Excel to solve.
NPV and IRR for Mutually Exclusive Projects 10. A company is considering two mutually exclusive projects, A and B. Project A requires an initial investment of $200, followed by cash flows of $185, $40, and $15. Project B requires an initial investment of $200, followed by cash flows of S0, $50, and $230. What is the NPV and IRR for each of the projects? Which project should the company choose? The firm's cost of capital...
why is for the calculation of NPV various methods are used? like
sometimes it is like the NPV of a project is determined by dividing
the given cash flows for the year by given WACC whereas on the
contrary, NPV is calculated by multiplying the given cash flows
with present value factors? this sounds a bit crazy as well but i
am confused. so can you please explain this?
aptal budgeting and cash flow estimation Internal Rate of Return (IRR)...
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