Calculate internal rate of return, Finance Basics

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







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
Related Questions
1-Suppose you deposit $ 5 000 in the bank. How much can you raise after 10 years when discount rate is 5% for the first four years and then rises to 7% annually? 2 -A used car co

You are called in as a financial analyst to appraise the bonds of Olsen’s Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of 13 percent, which is pai

Inventory Management - Supply Chain Management Determination of the best ordering policy in a manufacturing organisation In a manufacturing organisation, procurement may ha

Uncertainty and Safety Stocks Usually requirements may not be certain and thus the firm holds safety stock to safeguard stock out cases.The safety stock guards against delays

Net Present Value Method - DCF Technique The method discounts outflows and inflows and ascertains the total present value via deducting discounted outflows from discounted inf

Disadvantages of Floatation of New Shares 1. The cost of getting a quotation is high, mainly when a new issue of shares is completed and the company is small. It means that su

1. The Marlin Company operates 50 weeks a year, and its cost of goods sold last year was $1,500,000. The firm carries six items in inventory: three raw materials, two work-in-proce

Miller-Orr Model Unlike the Baumol's Model, Miller-Orr Model is a stochastic or like probabilistic model that creates the more realistic assumption of doubt in cash flows.

Factors that Influence the Cost of Finance 1. Terms of reference - if short term, the cost is generally low and vice versa. 2. Economic conditions prevailing - If a com

Computation of Payback Period Method 1. Under uniform annual incremental cash inflows - if the venture or an asset generates uniform cash inflows then the payback period (PB