1. Explain IRR, NPV and Payback Period? 2. Explain the function of weighted cost of capital? 3....
Question:
1. Explain IRR, NPV and Payback Period?
2. Explain the function of weighted cost of capital?
3. Explain the condition of the company if several financial indicators occur as follows:
• Payback Period is longer than the bank loan period
• Positive NPV
• IRR is greater than the loan interest rate
Will you accept the project?
4. Explain how to find IRR easily?
Case:
1. The ABC company has two very good businesses. Each has an initial investment of $ 25,000 with each cashflow as follows:
Year; Business 1 CF ; Business 2 CF
1 7500 7500
2 7000 7500
3 6000 7500
4 5000 7500
5 3500 7500
If it is known that the cost of capital is 12.5%, then calculate how much:
a. Payback Period and the NPV.
b. In your opinion, which business was chosen between Business 1 and Business 2?
2. ABC CFO company wants to plan to buy a generator at a price of 1.6 billion. The alternatives are as follows, buy directly 1.6 billion or rent at a price of 30 million per month. Assumption of a deposit interest of 7% a year. In your opinion, which one to choose?
Business
ISBN: 978-0133354263
8th Canadian Edition
Authors: Ricky Griffin, Ronald J.Ebert , Frederick Starke, Melanie Lang, George Dracopoulos