Look at the cash flows for projects F and G given below. Cash Flows ($) NPV IRR at Project Ce C3 C4 F 0 G C1 C2 (11,500) 6,600 6,600 6,600 (11,500) 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 26.5 7,706 C5 C6 C7 Cg (%) 10% 0 0 0 0 33.0 4,913 The cost of capital was assumed to be 10%. Assume that the forecasted cash flows for projects of this type are overstated by 12% on average. That is, the forecast for each cash flow from each project should be reduced by 12%. But a lazy financial manager, unwilling to take the time to argue with the projects' sponsors, instructs them to use a discount rate of 22%. a. What are the projects' true NPVs? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) Project F Project G NPV at 10% b. What are the NPVs at the 22% discount rate? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) Project F Project G NPV at 22%
Look at the cash flows for projects F and G given below. Cash Flows ($) NPV IRR at Project Ce C3 C4 F 0 G C1 C2 (11,500) 6,600 6,600 6,600 (11,500) 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 26.5 7,706 C5 C6 C7 Cg (%) 10% 0 0 0 0 33.0 4,913 The cost of capital was assumed to be 10%. Assume that the forecasted cash flows for projects of this type are overstated by 12% on average. That is, the forecast for each cash flow from each project should be reduced by 12%. But a lazy financial manager, unwilling to take the time to argue with the projects' sponsors, instructs them to use a discount rate of 22%. a. What are the projects' true NPVs? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) Project F Project G NPV at 10% b. What are the NPVs at the 22% discount rate? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) Project F Project G NPV at 22%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Question
am. 111.
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