User Account

All Pages

What is the incremental irr between project

Assignment Help Financial Management
Reference no: EM131972736

You are a senior manager at Nittany Aircraft and have been authorized to spend up to $550,000 for projects. The three projects you are considering have the following characteristics:

Project A: Initial investment of $385,000. Cash flow of $165,000 at year 1 and $270,000 at year 2. This is a plant expansion project, where the required rate of return is 12 %.

Project B: Initial investment of $215,000. Cash flow of $170,000 at year 1 and $190,000 at year 2. This is a new product development project, where the required rate of return is 17 %.

Project C: Initial investment of $145,000. Cash flow of $135,000 at year 1 and $65,000 at year 2. This is a market expansion project, where the required rate of return is 17 %.     

Assume the corporate discount rate is 15 %.

What is the IRR of project C? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations)

What is the NPV of project C? (Round answer to 2 decimal places. Do not round intermediate calculations)

What is the PI of project C? (Round answer to 2 decimal places. Do not round intermediate calculations)

What is the incremental IRR (aka, crossover point) between Project B & Project C? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations)

Reference no: EM131972736

Questions Cloud

Par portion of the total value at the time of issuance : What is the present value of the Par portion of the total value at the time of issuance?
About the relationship between interest rates and time : What conclusions can you draw about the relationship between interest rates, time, and future sums from the calculations you just did?
The coupon interest rate and yield to maturity : Explain the relationship that exists between the coupon interest rate and yield to maturity and the par value and market value of bond.
What should be the three-month forward exchange rate : What should be the 3-month forward exchange rate?
What is the incremental irr between project : What is the incremental IRR (aka, crossover point) between Project B & Project C? (
Nominal rate of interest be for risk-free one-year loan : While the real rate of interest for a one-year loan is 4 percent, then what should the nominal rate of interest be for a risk-free one-year loan?
What is the discounted payback if the initial investment : What is the discounted payback if the initial investment is $8,000?
The firm switches to proposed capital structure : What will be the level of expected EPS if the firm switches to the proposed capital structure?
The growth in the firm is described by this relationship : The growth in the firm is described by this relationship: The firm’s year-end dividend will be $2 per share, while EPS is $5. What is the stock price?

Reviews

Write a Review

Financial Management Questions & Answers

  Why might insurance company be leery of the estimated loss

Based on these data, estimate the inventory loss.- If the industry average gross profit was 50%, why might the insurance company be leery of the estimated loss?

  Concerned about bank cash and net float

A financial manager should be concerned about bank cash and net float, which is the sum of: A. collection and book cash. B. collection float and disbursement float. C. disbursement float and book cash. D. disbursement float and bank credit. E. None o..

  What is the earnings per share

Lifeline, Inc., has sales of $585,000, costs of $273,000, depreciation expense of $71,000, interest expense of $38,000, and a tax rate of 35 percent. The firm paid out $36,000 in cash dividends and has 35,000 shares of common stock outstanding. What ..

  What is the rate of return on investment

Calculating the Rate of Return of Investment Using Financial Leverage. Suppose Shaan invested just $10,000 of his own money and had a $90,000 mortgage with an interest rate of 8.5 percent. If after three years he sold the property for $120,000. What ..

  New stock can be sold to the public at the current price

New stock can be sold to the public at the current price, but a flotation cost of 15% would be incurred. What would be the cost of new equity?

  What is the probability of positive NPV

R&D Planning. A firm is in the process of assessing the economic prospects for a new bottling machine it is developing. Future research and development expenses could range from $4 to $9 million, with a most likely value around $7 million. What is th..

  Calculate the component cost of each type of capital

The balance sheet that follows indicates the optimum capital structure for Nealon Inc. Flotation costs are (a) 3% of market value for a new bond issue, and (b) $1.00 per share for preferred stock.  Equity above $3M would be obtained from the sale of ..

  How much should you charge for option

The risk-free rate of interest is 5 percent per year, compounded continuously. How much should you charge for the option?

  How much interest do you earn on a deposit

If the bank states an effective interest rate of 12% per annum, and there are 52.15 weeks, how much interest do you earn on a deposit of $100,000 over 1 week?

  What is your monthly mortgage payment

What is your monthly mortgage payment? When the mortgage expires in 5 years, what is the unpaid balance?

  What is the required return on this common stock

A company you are researching has common stock with a beta of 1.8. Currently, Treasury bills yield 2.5%, and the market portfolio offers an expected return of 10%. What is the required return on this common stock?

  Calculate the worst-case npv and best-case npv

Wendy-Wayne are evaluating project that requires initial investment of $899,000 in fixed assets. Calculate the best-case NPV. Calculate the worst-case NPV.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd