PrinciplesofCorporateFinance英文第十版习题解答Chap005.docVIP

CHAPTER 5 Net Present Value and Other Investment Criteria Answers to Problem Sets 1. a. A = 3 years, B = 2 years, C = 3 years b. B c. A, B, and C d. B and C (NPVB?=?$3,378; NPVC?= $2,405) e. True f. It will accept no negative-NPV projects but will turn down some with positive NPVs. A project can have positive NPV if all future cash flows are considered but still do not meet the stated cutoff period. 2. Given the cash flows C0, C1, . . . , CT, IRR is defined by: It is calculated by trial and error, by financial calculators, or by spreadsheet programs. 3. a. $15,750; $4,250; $0 b. 100%. 4. No (you are effectively “borrowing” at a rate of interest higher than the opportunity cost of capital). 5. a. Two b. -50% and +50% c. Yes, NPV = +14.6.  6. The incremental flows from investing in Alpha rather than Beta are -200,000; +110,000; and 121,000. The IRR on the incremental cash flow is 10% (i.e., -200 + 110/1.10 + 121/1.102 = 0). The IRR on Beta exceeds the cost of capital and so does the IRR on the incremental investment in Alpha. Choose Alpha. 7. 1, 2, 4, and 6 8. a. Payback A = 1 year Payback B = 2 years Payback C = 4 years A and B d. The present value of the cash inflows for Project A never recovers the initial outlay for the project, which is always the case for a negative NPV project. The present values of the cash inflows for Project B are shown in the third row of the table below, and the cumulative net present values are shown in the fourth row: C0 C1 C2 C3 C4 C5 -2,000.00 +1,000.00 +1,000.00 +4,000.00 +1,000.00 +1,000.00 -2,000.00 909.09 826.45 3,005.26 683.01 620.92 -1,090.91 -264.46 2,740.80 3,423.81 4,044.73 Since the cumulative NPV turns positive between year two and year three, the discounted payback period is: The present values of the cash inflows for Project C are shown in the third row of the table below, and the cu