Question

6. Use the following after-tax cash flows for project A and B to answer the following question: (Numbers in parentheses are negative cash flows). These two projects are independent.
Year     Cash Flow of A Cash Flow of B
0          ($2,400)             ($4,500)
1          $999                    $800
2          $950                    $950
3          ( $150)                   $950
4          $910                    $800
5          $990                    $900
6          ( $500)                  $1980
What is the approximate IRR of project A if the required rate of return is 10%?

Group of answer choices

a. 12.30%

b. 13.24%

c. 12.58%.

d. 19.76%

e. 14.23%

7.Use the following after-tax cash flows for project A and B to answer the following question: (Numbers in parentheses are negative cash flows). These two projects are independent.
Year     Cash Flow of A Cash Flow of B
0          ($2,400)             ($4,500)
1          $999                    $800
2          $950                    $950
3          ( $150)                   $950
4          $910                    $800
5          $990                    $900
6          ( $500)                  $1980
What is the approximate payback of project B if the required rate of return is 10%?

Group of answer choices

a. 4.56 years

b. 6 years

c. 5.05 years.

d. The payback cannot be calculated.

e. 4.96 years

8. Use the following after-tax cash flows for project A and B to answer the following question: (Numbers in parentheses are negative cash flows). These two projects are independent.
Year     Cash Flow of A Cash Flow of B
0          ($2,400)             ($4,500)
1          $999                    $800
2          $950                    $950
3          ( $150)                   $950
4          $910                    $800
5          $990                    $900
6          ( $500)                  $1980
What is the approximate crossover point between the two projects if the required rate of return is 10%?

Group of answer choices

a. 9.41%

b. 7.73%

c. 8.95%

d. 8.09%

e. There is no crossover point in this case.

Answer 1

B10 fc =IRR(B3:39) с E F G J D Project B year 2 year A B 1 Project A Cash flows 3 o $ (2,400.00) 4 1 $ 999.00 5 2 $ 950.00 6 3 $ (150.00) 7 4 $ 910.00 8 5 $ 990.00 9 6 $ (500.00 10 IRR 12.58% 11 6 Answer C Cash flows Cumulative CF 0 $ (4,500.00) $ (4,500.00) 1 $ 800.00 $ (3,700.00) 2 $ 950.00 $ (2,750.00) 3 $ 950.00 $ (1,800.00) 4 $ 800.00 $ (1,000.00) 5 $ 900.00 $ (100.00) 6 $ 1,980.00 $ 1,880.00 H Cross over rate year Cash flows 0 $ 2,100.00 1 $ 199.00 2 $ 3 $(1,100.00) 4 $ 110.00 5 $ 90.00 6 $(2,480.00) IRR 8.09% 12 Payback Period = 5+100/1980 8 Answer D 13 = 5.05 years 14 15 7 Answer C

B10 =IRR(B3:39) B с E F G H А 1 Project A D Project B year 0 2 year Cash flows Cross over rate year 0 30 -2400 Cash flows Cumulative CF -4500 =E3 800 =F3+E4 Cash flows =B3-E3 =B4-E4 4 1 999 1 1 950 2 950 =F4+E5 2 =B5-E5 52 6 3 - 150 3 950 3 =B6-E6 =F5+E6 =F6+E7 74 910 4 800 4 =B7-E7 8 5 5 900 =F7+E8 5 =B8-E8 96 6 1980 =F8+E9 6 990 -500 EIRR(B3:19). Answer C =B9-E9 =IRR(13:19) 10 IRR IRR 11 6 12 Payback Period = 8 Answer D 5+100/1980 =5+100/1980 13 II years 14 15 7 Answer C 16