risk-free rate c. Increase the risk-free rate d. Decrease the real return e. Increase the risk premium 4. You have a portfolio consisting solely of stock A and stock B. The portfolio has an expected return of 9.8 percent. Stock A has an expected return of 11.4 percent while stock B is expected to return 6.4 percent. What is the portfolio weight of stock A? a. 74 percent b. 81 percent c. 59 percent d. 87 percent e. 68 percent 5. The market rate of return is 11 percent and the risk-free rate of return
Premium Net present value Rate of return Internal rate of return
Comparing Net Present Value and Internal Rate of Return by Harold Bierman‚ Jr Executive Summary • • • Net present value (NPV) and internal rate of return (IRR) are two very practical discounted cash flow (DCF) calculations used for making capital budgeting decisions. NPV and IRR lead to the same decisions with investments that are independent. With mutually exclusive investments‚ the NPV method is easier to use and more reliable. Introduction To this point neither of the two discounted cash
Premium Net present value Internal rate of return Capital budgeting
Other annual benefits per employee - % of wages Annual health benefits per employee $ $ 3 2‚000 12 18% 2‚500 Cost of raw materials per can Other variable costs per can $ $ 0.25 0.05 Purchase cost per can Required rate of return Tax rate $ 0.45 12% 35% Make Cost to produce: Annual cost of direct material Need of 1‚100‚000 cans per year Annual cost of direct labor for new employees: Wages Health benefits Other benefits Total wages and benefits Other variable
Premium Net present value Cash flow Internal rate of return
additional cash flows to Rainbow of $5‚000 per year. Themachine costs $35‚000 and is expected to last for 15 years. Rainbow has determined that the cost ofcapital for such an investment is 12%.[A] Compute the payback‚ net present value (NPV)‚ and internal rate of return (IRR) for this machine.Should Rainbow purchase it? Assume that all cash flows (except the initial purchase) occur at the endof the year‚ and do not consider taxes. Rainbow Products is considering the purchase of a paint-mixing machine to reduce
Premium Net present value Investment Internal rate of return
11% Common Stock (Internal Only) 55% 15% The company’s marginal tax rate is 40%. a. 13.3% b. 7.1% c. 10.6% d. 10% 2. In general‚ the most expensive source of capital is: a. preferred stock b. new common stock c. debt d. retained earnings 3. Sonderson Corporation is undertaking a capital budgeting analysis. The firm’s beta is 1.5. The rate on 6 month t-bills is 5%‚ and the return on the S&P 500 index is 12%
Premium Net present value Internal rate of return Corporate finance
Table of contents: Page no. 1. Introduction 1 2. Investment appraisal 2 3. Payback method 3 4. Present value (PV)‚ future value (FV) and net present value (NPV) 5 5. Project 1 6 6. Comparing projects 11 7. Conclusion 12 8. References 13 9. Bibliography 14 Introduction: In 21st century business is much more developed and competitive as well with the presence of so many competitors
Premium Net present value Discounted cash flow Cash flow
will discount rates of 8‚ 10‚ 12‚ 14‚ and 16 percent affect the project’s feasibility? Figures 6 – 10 provide suggested answers for this question. The answers for this question assume a useful life of 5 years. Using a discount rate of 8 percent‚ the net present value of all benefits is $1‚732‚836.16; the net present value of all costs is $1‚640‚384.79; the overall net present value is $92‚451.36‚ and the project breaks even in approximately 3.84 years. Using a 10 percent discount rate‚ the net present
Premium Net present value Internal rate of return Rate of return
References: Byrd‚ J.‚ Hickman‚ K.‚ & McPherson‚ M. (2013). Managerial Finance. San Diego‚ CA: Bridgepoint Education Inc. Juhász‚ L. (2011). Net present value versus internal rate of return. Economics & Sociology‚ 4(1)‚ 46-53‚126. Retrieved from http://search.proquest.com/docview/1038451731?accountid=32521 Klein‚ T. C. (2005). Internal rate of return for law firm financial executives: A simple‚ non-t echnical explanation. The Attorney - CPA‚ 40(3)‚ 4-6. Retrieved from http://search.proquest.com/docview/205864289
Premium Net present value Investment Rate of return
investing into and new project to enter a racing team for a period of four years. The company has its expectations and in order to go ahead with the investment. The cost of capital for this investment is 15percent. The company set a target accounting rate of return on investment of 15percent and a payback period of three years or less for all projects. As external consultants we will be using different m and calculations to be able to determine whether this investment is worth going for and be able to make
Premium Net present value Rate of return Investment
techniques such as Accounting rate of return Net present value Profitability index Internal rate of return Modified internal rate of return Equivalent annuity These methods use the incremental cash flows from each potential investment‚ or project. Techniques based on accounting earnings and accounting rules are sometimes used - though economists consider this to be improper - such as the accounting rate of return‚ and "return on investment." Simplified and hybrid
Premium Net present value Internal rate of return