CHAPTER 9 – 14
19. The MIRR for the project with all three approaches is:
CHAPTER 9 – 15
Intermediate
Reinvestment approach:
Combination approach:
CHAPTER 9 – 16
Challenge
24. The equation for the IRR of the project is:
CHAPTER 9 – 17
26. The IRR of the project is:
CHAPTER 9 – 18
27. The IRR is the interest rate that makes the NPV of the project equal to zero. So, the IRR of the project
is:
28. First, we need to find the future value of the cash flows for the one year in which they are blocked by
CHAPTER 9 – 19
Calculator Solutions
7.
1
1
1
8.
1
1
1
1
I = 11%
I = 25%
$3,028.25
9
9
9
$29,071.16
CHAPTER 9 – 20
10.
12.
Project A
1
1
1
1
1
1
IRR CPT
I = 11%
$4,042.42
1
$6,900
IRR CPT
11.
$7,100
$7,100
$8,400
$8,400
1
1
NPV CPT
NPV CPT
$7,100
$7,100
1
1
1
1
CHAPTER 9 – 21
Project B
Crossover rate
1
1
IRR CPT
13.
Project X
$8,850
$8,850
$8,850
1
1
1
1
1
1
$6,750
$362.70
1
1
$15,200
$15,200
$16,800
$16,800
17.42%
NPV CPT
CHAPTER 9 – 22
Project Y
Crossover rate
$0
1
$1,300
1
$100
1
IRR CPT
11.19%
14.
$63,000,000
$63,000,000
1
1
1
1
I = 12%
IRR CPT
NPV CPT
39.48%
$7,683,673.47
$10,100
$10,100
$10,100
1
1
1
$7,800
$7,800
$7,800
1
1
1
$8,700
$8,700
$8,700
1
1
1
I = 0%
I = 15%
I = 25%
NPV CPT
NPV CPT
NPV CPT
$6,600
$400.92
CHAPTER 9 – 23
16.
Project I
$0
3
3
NPV CPT
NPV CPT
$77,092.41
$13,092.41
$0
3
3
NPV CPT
NPV CPT
$24,122.46
$6,122.46
$45,000
$45,000
$45,000
$65,000
$65,000
$65,000
$440,000
$440,000
$440,000
1
1
1
NPV CPT
18.14%
NPV CPT
$10,300
$10,300
$10,300
$9,200
$9,200
$9,200
1
1
1
1
1
1
NPV CPT
NPV CPT
NPV CPT
$21,249.44
$19,660.89
$17,762.79
CHAPTER 9 – 24
CHAPTER 9 – 25
CHAPTER 9 – 26