Problem 9.14 – Problems with IRR (Howell Petroleum, Inc.)
Fundamentals of Corporate Finance
Ross, Westerfield, and Jordan
13th Edition
Find the NPV of the project then the two IRR’s.
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Find the NPV of the project then the two IRR’s.
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Given the cash flows for the following years, the expected FCF growth rate, and WACC… find the horizon/continuing value and the firm’s market value today – then given debt and shares outstanding… estimate the current price per share
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With the required return, find the profitability index and NPV for the projects. After, figure out which project to accept for each.
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Determine the NPV of the computer-based system given various pretax cost savings. Should the project be accepted? Finally, determine the level of pretax savings whereby you would be indifferent between accepting and rejecting the project.
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Given an estimate of free cash flows, growth rate, and WACC… determine the present value of the free cash flows for the explicit period, calculate the horizon value, and compute the price per share.
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Given the information on the airlines (after-tax operating income, depreciation expense, capital expenditures, free cash flow, etc.)… find the company’s stock price today using the corporate valuation model approach.
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Calculate the best-case and worst-case NPV figures for the project, considering the given estimates for cost, life, depreciation, sales, price, variable and fixed costs, tax rate, and required return, while accounting for the specified uncertainty level.
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Calculate the project’s NPV, considering the cost of the equipment, bonus depreciation, equipment resale value, sales projections, fixed and variable costs, initial and returned investment in NWC, tax rate, and required return.
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True or false: In the case of partially financing a project with debt, it is recommended to evaluate the project as if it were solely financed by equity, attributing all cash outflows required for the project to stockholders and all cash inflows as returns to them.
Should you accept or reject the investment project based on the internal rate of return (IRR) rule, considering the project’s cost, projected cash flows, and required rate of return?