1. Each project has RM 10,000, and the cost of capital for each project is 12%. The projects' expected cash flows are as follows:

Expected Net Cash Flows

YEAR	PROJECT A	PROJECT B
0	(10,000)	(10,000)
1	6,500	3,500
2	3,000	3,500
3	3,000	3,500
4	1,000	3,500

a)  Calculate each project's internal rate of return (IRR), and modified internal rate of return (MIRR).

b)  How might a change in the cost of capital produce a conflict between the NPV and IRR ranking of these two projects? Would this conflict exist if k were 5%

(Hint: Plot the NPV profiles)

2.  A 10 year, 12% semi annual coupon bond, with a par value of $1000, may be called in 4 years at a call price of $1060. The bond sells for $1100. (assume that the bond has just been issued)
1) What is the bond's yield to maturity?
2)What is the bonds current yield?
3)What is the capital gain or loss yield?
4)What is the bond's yield to call?

Posted Date: 2/23/2013 5:37:14 AM | Location : United States

Ask an Expert

Related Discussions:- Calculate internal rate of return, Assignment Help, Ask Question on Calculate internal rate of return, Get Answer, Expert's Help, Calculate internal rate of return Discussions

Write discussion on Calculate internal rate of return
Your posts are moderated

Write your message here..

Related Questions

What is the objectives of listing, What is the Objectives of Listing ... What is the Objectives of Listing Objectives of listing are mainly to: (i) Provide liquidity to securities. (ii) Mobilize savings for economic growth. (iii) Protect

Constant amount per share or fixed d.p.s., Constant amount per share or fix... Constant amount per share or fixed D.P.S. 1. The DPS is fixed in total amount of irrespective of the earnings level. These generate certainty and are consequently preferred vi

What are the characteristics of an efficient market, What are the character... What are the characteristics of an efficient market? The word market efficiency refers to the speed, ease, and cost of trading securities. In a well-organized market, securitie

Valuation of share, Valuation of Share A number of parties are interes... Valuation of Share A number of parties are interested however in the value of shares and securities and that will include: Company shareholders, vendors and directors of

Stock repurchase, Stock Repurchase The company can buy back also sever... Stock Repurchase The company can buy back also several of its outstanding shares instead of paying cash dividends. This is identified as stock repurchase and or bought back or

Pv and FV.., hey hey

P/E ratio, How are earnings calculated for the Pe ratio? How are earnings calculated for the Pe ratio?

Costs of capital, a bond that has a 1000 per value and a contract or coupon... a bond that has a 1000 per value and a contract or coupon interest rate of 12.8%. The bond is selling for a price of $1125 and will mature in 10 years. The firm''s tax rate is 34%

Compute the payback period - example, Compute the Payback Period - Example ... Compute the Payback Period - Example Cedes restriction has the following details of two (2) of the future production plans. Just one of these machines will be purchased and su

Stock valuation, Math solution Math solution