Determining the internal rate of return

Reference no: EM13995657

1. Calculate the net present value of a business deal that costs $2500 today and will return $1500 at the end of this year and $1700 at the end of the following year. Use an interest rate of 13%.

2. Find the net present value of a project that has cash flows of - $ 12,000 in Year 1, +$5000 in Years 2 and 3, -$2000 in Year 4, and +$6000 in Years 5 and 6. Use an inter est rate of 12%. Find the interest rate that gives a net present value of zero.

3. A friend asks you for a loan of $1000 and offers to pay you back at the rate of $90 per month for 12 months.

a. Using an annual interest rate of 10%, find the net present value (to you) of loaning your friend the money. Repeat, using an interest rate of 20%.

b. Find an interest rate that gives a net present value of 0. The interest rate for which NPV = 0 is often called the internal rate of return.

Reference no: EM13995657

Questions Cloud

What amount should northwest report in its balance sheet : What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2011?

Measure accomplishment of fundamental objectives : Describe in your own words the difference between a means objective and a fundamental objective. Why do we focus on coming up with attribute scales that measure accomplishment of fundamental objectives, but not means objectives? What good does it ..

Requisite model of the current car-purchase decision : Should trading in the car count as an uncertain event or a future decision? What are the implications for building a requisite model of the current car-purchase decision if trad ing in the car is treated as an uncertain event? As a decision?

Second proposition estimates the wacc : In case 2, MM conclude you should finance the firm 100% with debt. What is the key assumption change that they make? Repeat the graph from part a) with your new depictions and explanations of the cost of debt, the cost of equity, and the WACC.

Determining the internal rate of return : Find an interest rate that gives a net present value of 0. The interest rate for which NPV = 0 is often called the internal rate of return.

What is the sample and what is the population : Do you think Mindas data collection method is good in general and If you were going to give advises on the data collection method, what would be your suggestions?

When considering whether to account for its investment : When considering whether to account for its investment in Marlon under the equity method, what criteria should Miller's management apply?

What is the maximum speed of the two-kg mass : What is the maximum speed of the 2.00-kg mass? What is the maximum acceleration of the 2.00-kg mass? What are the position, velocity, and acceleration of the 2.00-kg mass as functions of time?

Basic elements of a real-estate investor : Identify the basic elements of a real-estate investor's decision situation. What are the investor's objectives? Is the situation dynamic (that is, are there sequential decisions)? What are some of the uncertainties that the investor faces? What ar..

User Account

All Pages