Describe the use of internal rate of return

Reference no: EM131407324

Assignment: Using the Payback Method, IRR, and NPV

The purpose of this assignment is to allow the student to calculate the project cash flow using net present value (NPV), internal rate of return (IRR), and the payback methods.

Assignment Steps

Resources: Corporate Finance

Create a 350-word memo to management including the following:

• Describe the use of internal rate of return (IRR), net present value (NPV), and the payback method in evaluating project cash flows.
• Describe the advantages and disadvantages of each method.

Calculate the following time value of money problems:

1. If you want to accumulate $500,000 in 20 years, how much do you need to deposit today that pays an interest rate of 15%?

2. What is the future value if you plan to invest $200,000 for 5 years and the interest rate is 5%?

3. What is the interest rate for an initial investment of $100,000 to grow to $300,000 in 10 years?

4. If your company purchases an annuity that will pay $50,000/year for 10 years at a 11% discount rate, what is the value of the annuity on the purchase date if the first annuity payment is made on the date of purchase?

5. What is the rate of return required to accumulate $400,000 if you invest $10,000 per year for 20 years. Assume all payments are made at the end of the period.

Calculate the project cash flow generated for Project A and Project B using the NPV method.

• Which project would you select, and why?
• Which project would you select under the payback method? The discount rate is 10% for both projects.
• Use Microsoft Excel to prepare your answer.
• Note that a similar problem is in the textbook in Section 5.1.

Attachment:- Attachments.rar

Reference no: EM131407324

Questions Cloud

List four shift factors of supply : Mary has just stated that normally, as price rises, supply will increase. Her teacher grimaces. Why?

Where are the reactants in a chemical equation : Where are the reactants in a chemical equation?

What is meant company listing on australian stock exchange : What is meant by a company listing on the Australian Stock Exchange? Research question: What advantages might listing offer a company? Are there any disadvantages

Why is price directly related to quantity supplied : Distinguish the effect of a shift factor of demand on the demand curve from the effect of a change in price on the demand curve.

Describe the use of internal rate of return : Describe the use of internal rate of return (IRR), net present value (NPV), and the payback method in evaluating project cash flows. Describe the advantages and disadvantages of each method.

Discuss about the sunspot count project : As you have learned in the solar lab the appearance of sunspots in the Sun's photosphere are cyclic in nature. The average number of years for the cycle from minimum activity to minimum is 11.Read the Solar Cycle 24 Update document to review what ..

What would the holders of the misprinted sheet do : When the government recognized that it could not recall all the stamps, it decided to issue the remaining ones. What would that decision likely do?

Describe the categorize and functor : Describe the categorize and functor? Monoidal functors, equivalence of monoidal categories.

Evaluate the integral for such k : For what values of k does the integral xe^(kx) from x=0 to infinity converge? Evaluate the integral for such k.

User Account

All Pages