Write the expression for npv using the unknown r as discount

Assignment Help Financial Management
Reference no: EM13770485

Consider the following cash flow [-100, + 230, -132]. We want to decide under what range of discount rate this is an advantageous investment. But noting the change in sign, we conclude IRR is not a suitable instrument.                            

 

  • Write the expression for NPV using the unknown r as discount rate.

 

  • Write this expression as a function of [1/(1+r)].                               

 

  • Show that the expression in (b) as a quadratic equation. Look this up if necessary.

 

  • Solve the quadratic equation for its two roots.

 

  • Prepare a table of NPV vs. r for r= 0,10,20,40,100%.

 

  • Draw the graph of NVP vs. r.

 

  • Under what range of r values is this an acceptable investment?

 

Noting that NPV increases then declines as r grows from 0 to 40%, determine at what level of r NPV is a maximum (recall that d(NPV)/ds = 0, where NPV is a maximum). If you have sufficient background, solve this using calculus. If not, graphically find the top of the NPV hill (where slope = 0).

What is the maximum value of NPV? (There is one bonus point for the correct answer using calculus).

 

 

Reference no: EM13770485

Questions Cloud

Why do you think domestic terrorists exist in society : Why do you think domestic terrorists exist in society? Explain. Do you think various triggers drive them to extremism, or are they slowly conditioned throughout their lives? Explain
What actions were taken against the victims or targets : What were the antecedents, or leading causes, of this campaign of terror? Explain. What were the motivations of the terrorists? Explain in detail. What actions were taken against the victims/targets during this terror campaign
Inflation or the possibility of increasing inflation : Find TWO articles which discuss the likelihood of continued inflation or the possibility of increasing inflation in the near future 2014-2015.
Key element of successful enterprise risk management : Which of the statements below best describes the concept of Enterprise Risk Management? Which of the following is a key element of successful Enterprise Risk Management
Write the expression for npv using the unknown r as discount : Consider the following cash flow [-100, + 230, -132]. We want to decide under what range of discount rate this is an advantageous investment. But noting the change in sign, we conclude IRR is not a suitable instrument.Write the expression for NPV usi..
The menu structure for holiday travel vehicle"s existing : The menu structure for Holiday Travel Vehicle's existing character-based system is shown here. Develop and prototype a new interface design for the system's functions, using a graphical user interface.
Impact of debt financing on accounting risk and return : "Impact of Debt Financing on Accounting Risk and Return"  Please respond to the following: Using the ratios provided within the scenario, submit a debt policy that offers financial leverage for the board of directors of the retirement facility. Ple..
Write paper on waiting for superma directed by guggenheim : Write paper on Waiting for Superma directed by Guggenheim and Why Are All the Black Kids Sitting Together in the Cafeteria? By Beverly Tatum.
Research proposal based on topic relevant to criminal justic : Write a research proposal based on a topic relevant to criminal justic 8-10 pages in length in APA format. The research proposal will involve both library research and the use of journal articles

Reviews

Write a Review

Financial Management Questions & Answers

  1security brokers inc specializes in underwriting new

1.security brokers inc. specializes in underwriting new issues by small firms. on a recent offering of beedles inc. the

  Profitability-liquidity-leverage and activity ratios

Include profitability, liquidity, leverage, and activity ratios for which you have data available (data may not be available for all ratios - just use what's available in the case). Present your calculations in table format.

  Review the pharmacarecompcare scenario in assignment to

legal and ethical considerations in marketing product safety and intellectual propertyreview the pharmacarecompcare

  First of each month to his retirement account.

Starting today, George is going to contribute $300 on the first of each month to his retirement account. His employer will contribute an additional 50% of the amount George contributes. If both George and his employer continue to do this and he can e..

  Calculation is based on an annual effective interest rate

Sydney wins a prize. She has a choice of receiving a payment of $160,000 immediately or of receiving a deferred perpetuity with $10,000 annual payments, the first payment occurring in exactly four years. Which has a greater present value if the calcu..

  Compute the materials price variance

Prepare a schedule of cash collections for May through July and compute the materials price variance and the materials quantity variance.

  Describe the competition in the overnight package delivery

Describe the competition in the overnight package delivery industry, and the strategies by which those two firms are meeting the competition. What are the enabling and inhibiting factors facing the two firms as they pursue their goals? Do you think t..

  Dividend is expected to grow ata constant rate

Super carpeting Inc just paid a deidend (Do) of $3.12, and its dividend is expected to grow ata constant rate (g) of 6.5% per year. Supers expected stock price one year from today will be___?

  Maintenance costs for a regenerative thermal oxidizer

Maintenance costs for a regenerative thermal oxidizer have haven increasingly uniformly for 5 years. The cost in year 1 was $8,000 and it increased by $900 per year through year 5. Compute the present worth of the costs using an interest rate of 10% ..

  How much can sales increase

Maggie's Muffins, Inc., generated $2,000,000 in sales during 2013, and its year-end total assets were $1,200,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..

  Calculate the economic manufacturing quantity

The demand for 1,000 units of a part to be used at a uniform rate throughout the year may be met by manufacturing. The part can be produced at the rate of 3 per hour in a department that works 1,880 hours per year. The set-up cost per lot is estimate..

  How many shares must the company sell and at what price

A company wants to raise $100 million on a new stock issue. According to their investment banker, a sale of new stock will require 8% under pricing and a 7% spread. Assuming the company’s stock price does not change from its current price of $100 per..

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