7-2

Required Return
Period

20%
CF
0
1
2
3
4
5
6
7
8
9

(200,000)
1,000,000

PV of CF
NPV
IRR

7-8

$193,806.70
($6,193.30)
19.58% reject the offer if the IRR is less than required re

Required Return
Period

20%
CF
0
1

(100,000)
120,000

PV of CF
NPV
IRR

7-14

$100,000.00
$0.00
20.00% indifferent if you accept or reject the offer

Required Return
Period

8%
CF
0
1
2
3
4
5
6
7
8
9
10

PV of CF

(120,000,000)
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
(5,000,000)

$122,621,790.78

P0

NPV
IRR

$2,621,790.78
8.98% Accept

7-19
PMT
cost
payback period

7-20

500 per month

5000
10 months

Required Return
Period

10%
CF
0
1
2
3
4
5
6

(10) Cumulative CF
payback
5
5
2
7
2
9
2
11 4.5 years
2

PV of CF
NPV
IRR

$10.31
$0.31
11.45%

7/21
Required Return
Period

7%
A
0
1
2
3
4
5
6

Irr

NPV

answer
Page 217

B
(10)
2
2
2
2
2
20%

###
1.5
1.5(1.02)^1
1.5(1.02)^2
1.5(1.02)^3
1.5(1.02)^n
17%

We choose A
Mill
Mill
18.571
20.000
we choose B

IRR Rule and mutually exclusive investment

7-28

Required Return

10%
huawei

Period

CF
0
1
2
3

10%
Cisco

PV of CF
NPV
IRR

(20)
20
20
20

-100
60
60
60

$49.74
$29.74
83.93%

$149.21
$49.21
36.31%

8-1

incremental sale= sales of new pizza - lost of sale of origi

A

12 million

8-6

incremental sales = sales of new pizza- losy of sales of original pizza from
16 million

free cash flow for cellular access = net income from operating activities + Dep exp - capita
140 million

8-12

free cash flow from outside supplier

(390,000.00)

The quiz

return
1 portfolio
Stock A
B

20000
30000

2 RE = Rt +B(market risk prem)

3 WACC

-6%
11%

he IRR is less than required return

ccept or reject the offer

D/rate
-25000000

5 years rounded

P0

irrB

D1/R-g
10 1.5/r-0.02
1.5 10(r-0.02)
17%

Same scale
same timing
Same risk

Rank the project by

comparing IRR

12%
huawei
Cisco

12%

12%
Cisco

CF

(20)
20
20
20

-100
60
60
60

$48.04
$28.04
83.93%

$144.11
$44.11
36.31%

-20
25
25
25

$60.05
$40.05 D
111.85%
C

ew pizza - lost of sale of original pizza

of sales of original pizza from custimer who will not have switch

g activities + Dep exp - capital expense - net working capital change

he will send the solution for this problem

60-35 in the question

the old lease is better

0-35 in the question

he old lease is better