One problem with the irr method

Assignment Help Financial Management
Reference no: EM131551589

One problem with the IRR method is that:

it does not take account of cash flows over a project’s full life.

it does not take account of the cash outflows.

it does not provide a rate of return.

it values a dollar received today the same as a dollar that will not be received until sometime in the future.

it assumes that the cash flows generated by a project can be reinvested back into the same project, and this assumption is often not valid.

Reference no: EM131551589

Questions Cloud

What is the break-even price for the option : A call option on UK pounds has a strike price of $2.05/£ and a cost of $0.02. What is the break-even price for the option?
Operating and cash cycle better : Ansley Inc. wants to understand its operating and cash cycle better. calculate their operating and cash cycle.
The call premium and put premium of the stock price : A stock price is trading today at $100. The call premium and put premium is 10% of the stock price as of today.
List three limitations of this type of model : The expected dividend in December of the year 2020. List three limitations of this type of model that we use for pricing a stock.
One problem with the irr method : One problem with the IRR method is that: it does not take account of cash flows over a project’s full life.
Joined the investment banking firm of dreamville : You've just joined the investment banking firm of Dreamville. If the interest rate is 9 percent compounded monthly, what is the PV for both the options?
Continuously compounded annual rate of return on this bond : What is the continuously compounded annual rate of return on this bond if purchased today?
What is the balance owed on your loan when the first payment : What is the balance owed on your loan when the first payment is due? (Assume a 365-day year.)
All rates are annualized and continuously compounded : All rates are annualized and continuously compounded. At what rate will the bank be able to borrow if it follows the proposal of its CFO?

Reviews

Write a Review

Financial Management Questions & Answers

  When buying and selling stocks in an efficient market

Is stock research and analysis important when buying and selling stocks in an efficient market?

  Determine the cash inflows and outflows for each year

Determine the cash inflows and outflows for each year - corporate policy of not accepting projects that take more than 3.5 years to pay for themselves, and assuming an 11% cost of capital.

  Considering the purchase of one of two machines

You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $170 initially, and then $85 per year in maintenance costs. The discount rate is 12 percent and the tax rate is zero. C..

  Calculate the sustainable growth rate for webb

You have located the following information on Webb’s Heating & Air Conditioning: debt ratio is 54 percent, capital intensity is 1.10 times, profit margin is 12.5 percent, and the dividend payout is 25 percent. Calculate the sustainable growth rate fo..

  Explain why firm might prefer stock repurchase

Explain why a firm might prefer a stock repurchase... Bookmark Explain why a firm might prefer a stock repurchase rather than an increase in the firm's regular dividend.

  What is current share price

If the required return on the stock is 8 percent, what is the current share price?

  What is the crossover rate for these two projects

Consider the following two mutually exclusive projects: What is the crossover rate for these two projects?

  Determine the outcome of the hedge

Determine the outcome of the hedge if, in fact, interest rates increase by 1% by October 2017.

  Calculate the net present value under each option

Your Company is evaluating the acquisition of a new piece of equipment that has an installed cost of $ 10,000,000. The equipment will add $2,000,000 to earnings before interest and taxes each year for the next 12 years. Calculate the payback period f..

  When assessing value of business-capital assets cash flow

When assessing the value of a business, ________ is MOST important. capital assets cash flow profit. Which of the following assets is LEAST likely to depreciate over time?  Free cash flow is the available cash after ________ have been paid. sharehold..

  Option to delay the start of the project

What is the value of Keedsler Motors Co.’s option to delay the start of the project?

  How much of this will be debt and equity

Compute the weighted average cost of capital on the first $250 million of funds and saven Travel will need to raise $150 of additional capital for expansion. How much of this will be debt and equity?

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!

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