university_of_saskatchewan公司財(cái)務(wù)導(dǎo)論(金融學(xué))-資料下載頁(yè)
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【正文】 COMM 203 26 IRR, NPV, and Mutually Exclusive Projects Discount rate 2% 6% 10% 14% 18% 60 40 20 0 – 20 – 40 Net present value – 60 – 80 – 100 22% IRR A IRR B 0 140 120 100 80 160 Year 0 1 2 3 4 Project A: – $350 50 100 150 200 Project B: – $250 125 100 75 50 26% Crossover Point Fall 2021 COMM 203 27 Summary of Investment Criteria I. Discounted cash flow criteria ? Net present value (NPV). ? take a project if its NPV is positive. ? preferred decision criterion. ? Internal rate of return (IRR). ? take a project when IRR the required return. ? Problems for nonconventional cash flows ? Profitability index (PI). ? take an investment if the index exceeds . ? measures the present value per dollar invested. Fall 2021 COMM 203 28 Summary of Investment Criteria II. Payback criteria ? Payback period. ? take a project if its payback period is less than some prespecified cutoff. ? Discounted payback period. ? take an investment if the discounted payback is less than some prespecified cutoff. III. Accounting criterion ? Average accounting return (AAR). ? take an investment if its AAR exceeds a benchmark. Fall 2021 COMM 203 29 ? A firm evaluates all of its projects by applying the IRR rule. If the required return is 18 percent, should the firm accept the following project? Solution to Problem Y e a r C a s h F l o w0 $ 3 0 , 0 0 01 2 5 , 0 0 02 03 1 5 , 0 0 0Fall 2021 COMM 203 30 Solution to Problem (Continued) ? To find the IRR, set the NPV equal to 0 and solve for the discount rate: NPV = 0 = $30,000 + $25,000/(1 + IRR)1 + $0/(1 + IRR)2 +$15,000/(1 + IRR)3 ? At 18 percent, the puted NPV is $316. ? So the IRR must be greater than 18 percent. We know this because the puted NPV is positive. ? By trialanderror, we find that the IRR is percent.
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