When do the NPV and the IRR hurdle investment decision rules give different recommendations? Which one of
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- When do the NPV and the IRR hurdle investment decision rules give different recommendations? Which one of these rules should you use when they give different recommendations?
- The table below shows the projected net cash flows (including reversion) for Property A and Property B. If both properties sell at fair market value for a cap rate (initial and terminal net cash yields) of 7%, then which of these two properties is perceived to be riskier by the market? Why? (show work).
Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
A | $ 1.0000 | $ 1.0000 | $ 1.0000 | $ 1.0000 | $ 1.0000 | $ 1.0000 | $ 1.0000 | $ 1.0000 | $ 1.0000 | $ 15.2857 |
B | $ 1.0000 | $ 1.0200 | $ 1.0404 | $ 1.0612 | $ 1.0824 | $ 1.1041 | $ 1.1262 | $ 1.1487 | $ 1.1717 | $ 18.6093 |
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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