How is the internal rate of return (IRR) of a project defined when it is used in capital budgeting decisions?

when using Payback Period to assess the attractiveness of different investment projects, aside from projects' cash flow projections, the relative risk is only measured by

You own a portfolio of composed (by market value) of 60% stocks and 40% bonds. The expected return on your stocks is 15%. The expected return on your bonds is 5%.

What is the expected return portfolio?

Calculate the internal rate of return (IRR) for a project that requires a one-time immediate investment of $500,000, is expected to generate annual net revenues of $90,000 annually for the nest ten years (assume the cash flow are realized at each year' end), and its materials will be sold for a scrap value of $50,000 at the end of the project's 10-year life.

To evaluate the relative attractiveness of different potential investment projects, which of the following factors are advantages of using Net Present Value (NPV) over internal Rate of Return (IRR)?

i) Ability to effectively incorporate future periods with negative cash flows   

ii) accuracy of cash flow projections

iii) adjusts for the time value of money   

iv) explicit adjustment for riskiness of project

You can conclude that the long term growth is the same as the rate of discount in a perpetuity whenever:

(hint : PV perp = CF1 / ( k - g) )

Calculate the net present value of a project that requires a one time immediate investment of $1,000,000, is expected to generate annual net revenues of $150,000 for the next ten years (assume the cash flows are realized at each year's end) and its material will be sold for a scrap value of $100,000 at the end of the project life. Assume the discount rate of 10.30%.

The Modified Internal Rate of Return (MIRR) for a project is 

Which of the following are weakness of using Payback (payback period) method in capital budgeting

Which of the following are possible methods of adjusting an internal rate of return (IRR) analysis to account for the risk of the project being evaluated

A parent is considering sending their child in 15 years to a university that will charge EGP300,000 in total. They have saved EGP50,000 as of today. Can you calculate the necessary annuity at 5% rate of investment to meet this target?

Please round to the nearest whole EGP.

Annuity factors for 15 years, 5% = 21.5786

The opportunity cost of the capital used to invest in a project is

A parent is considering sending their child in 15 years to a university that will charge EGP 250,000 in total. They have saved EGP 29,000 as of today. Can you calculate the necessary annuity at 5% rate of investment to complete this project?

Round to the nearest whole EGP.

Annuity factor for 15 years, 5% = 21.5786

An annuity company needs to fund the payouts on a contract it is selling to a professional athlete. The athlete wants to buy a 20-year period certain annuity that will pay him $1,000,000 annually, with the first payment to be made in exactly 12 years. The annuity company wants to fund the future payments by setting aside equal dollar amount until the first payment is due. Assuming a 6.50% annual return on investment, what is the annual amount the annuity company must set aside to be able to fund the payments over the life of the annuity? (Assume first set aside to fund annuity to be made in one year and last funding contribution to be made at time of first annuity payment.)

An analyst is evaluating a potential investment in open-pit gold mining venture. The projected production from the mine is 170,000 ounces of gold per year for 10 years. To reflect the uncertainty over gold price the analyst has decided to use three different scenarios: Best case (20% probability): $1800/oz.   Base case (50% probability): $1350/oz.  Worst case (30% probability): $1000/oz.       Assuming a 3% risk-free rate and a 12% opportunity cost of capital, the present value of revenues from gold sales based on projected open-pit mine production and price scenarios is closest to:

Calculate the internal rate of return (IRR) for a project that requires a one-time immediate investment of $10,000,000, is expected to generate net revenues of $1,375,000 annually for the next twelve years (assume the cash flows are realized at each year’s end), and the asset can be sold for $1,000,000 at the end of the project’s 12-year life.

The future value of an annuity is positively related to which of the following? ( compounding )

I-Annual interest rate

II-Compounding frequency

II-Periodic annuity payment

IV-Life of the annuity contract

A mother and father are saving for their child's wedding in 10 years. Given the high rate of inflation they expect the wedding to cost EGP 100,000. They also want to help their child buy a house by giving them a down payment of EGP 150,000. They have saved EGP 50,000 as of today. Can you calculate the necessary future annual savings at an 8% rate of interest so the parents will be able to make these gifts? Please round to the nearest whole EGP. Annuity Factor for 10 years at 8% = 14.49.

Calculate the net present value of a project that requires one-time immediate investment of USD 1,000,000 is expected to generate annual net revenue of USD 175,000 annually, assume cash flows are realized at year end and its material will be sold for a scrap value of USD 50,000 at the end of the projects 10 years’ life, assume the discount rate is 10%

Which of the following descriptions is the most accurate characterization of IRR:

A company is considering an investment of EGP 13million in a new line of robots for the mining industry that would produce a free cash flow in the next five years in the following amounts: Year 1: 1.2 Year 2: 0 Year 3: 7.8m Year 4:14m Year 5: 27m Calculate the NPV of the project using an 11.75% rate of discount

How is sunk cost treated in capital budgeting:

If you are saving for your university in 10 years. Given the high rate of inflation you expect the cost to be EGP 400,000. You also want to save a down payment for your house of EGP 700,000 to be made at the same time, while you have saved EGP 100,000 as of today.

Can you calculate the necessary future annual savings at an 7% rate of interest so you can save to make to pay for these items? Round to the nearest whole EGP.