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[DOC File]Chapter 8
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The Internal Rate of Return. Internal rate of return (IRR) – the rate that makes the present value of the future cash flows equal to the initial cost or investment. In other words, the discount rate that gives a project a $0 NPV. IRR decision rule – the investment is acceptable if its IRR exceeds the required return.
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[DOC File]Multiple Choice Questions
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Virunga Co uses the net present value (NPV) method, the internal rate of return (IRR) method and discounted payback period (DPP) to appraise its new investment opportunities. An investment opportunity was recently appraised using each of these methods and was estimated to provide a positive NPV of $10·5 million, an IRR of 15% and a DPP of ...
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[DOC File]Chapter 10
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Calculate net present value (NPV) and internal rate of return (IRR) for a given project and evaluate each method. Define NPV profiles, the crossover rate, and explain the rationale behind the NPV and IRR methods, their reinvestment rate assumptions, and which method is better when evaluating independent versus mutually exclusive projects.
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[DOC File]CAPITAL BUDGETING
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The Internal Rate of Return (IRR) Rule. Internal rate of return: The discount rate that makes the present value of future cash flows equal to the initial cost of the investment. Equivalently, the discount rate that gives a project a zero NPV. IRR Rule: An investment is accepted if its IRR is greater than the required rate of return.
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[DOC File]Implementing the Internal Rate of Return Financial ...
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The implementation of the most commonly used methods of the dynamic approach to investment project evaluation, the net present value and the internal rate of return methods, is largely facilitated by the use of the @NPV and the @IRR financial functions from the Excel program package.
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[DOC File]Problems and Solutions e.edu
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Comparing NPR and IRR – Monica and Rachel are having a discussion about IRR and NPV as a decision model for Monica’s new restaurant. Monica wants to use IRR …
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[DOC File]Chapter 7: Net Present Value and Capital Budgeting
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c. the internal rate of return on the investment. d. the net present value of the investment. Capital Budgeting with Inflation. 7.13 Consider the following cash flows on two mutually exclusive projects. Year Project A Project B. 0 -$40,000 -$50,000. 1 20,000 10,000. 2 15,000 20,000. 3 15,000 40,000
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[DOC File]End of Chapter Exercises: Solutions
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NPV IRR BCR A $6.36 33% 1.21 B $11.32 29% 1.38 C $12.64 20% 1.18 (ii) rank by: NPV C, B, A. IRR A, B, C. BCR B,A,C (iii) Only project A is affected by the reinvestment rate. At 22% the future value of $40 at end of year 2 is $48.8.Therefore select projects B and C to maximize return on $100 investment. At 28% the future value of $40 at end of ...
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[DOC File]Chapter 7: Net Present Value and Capital Budgeting
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c. IRR Calculation: In order to determine the internal rate return (IRR) of the investment in new equipment, determine the discount rate that makes the NPV of the project equal to zero. ... The net present value (NPV) of selling the old machine and purchasing the new machine in five years is …
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Npv and irr examples