Description
Complete the following Questions and Problems from each chapter as indicated.
Show all work and analysis.
Prepare in Microsoft® Excel® or Word.
- Ch. 9: Questions 7 & 8 (Questions and Problems section)
- Ch. 10: Questions 3 & 13 (Questions and Problems section)
- Ch. 11: Questions 1 & 7 (Questions and Problems section)
Format your assignment consistent with APA guidelines if submitting in Microsoft® Word.
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Running Head: Financial Assignment Answers
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Financial Assignment Answers
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Financial Accounting Answers
7. Calculating IRR [LO5] a firm evaluates all of its projects by applying the IRR rule. If the
required return is 14 percent, should the firm accept the following project?
The general equation for calculating the IRR is:
0 = CF0+CF1/ (1+IRR) +CF2 / (1+IRR) 2+CF3/ (1+IRR) 3
The equation for calculating the IRR for this project therefore becomes:
0=– $26,000 + $11,000/ (1+IRR) + $14,000/ (1+IRR) 2 + $10,000/ (1+IRR) 3
Using a spreadsheet to solve the above equation gives IRR as 17%
The project is accepted since the IRR (17%) is greater than the required return.
8. Calculating NPV [LO1] for the cash flows in the previous problem, suppose the firm uses the
NPV decision rule. At a required return of 11 percent, should the firm accept this project? What
if the required return is 24 percent?
NPV formula= (CF1/ (1+IRR) +CF2/ (1+IRR) 2+CF3/ (1+IRR) 3) -CF0
At IRR of 11% = ($11000/ (1.11) +$14000/ (1.11...