Answer:
Multiple IRRs:
Said another way, Multiple IRRs occur when a project has more than one <em>internal rate of return.</em> The problem arises where a project has non-normal cash flow (non-conventional cash flow pattern).
Internal rate of return (IRR) is one of the most commonly used capital budgeting tools. Investors make decisions by comparing the IRR of the project under consideration with the <em>hurdle rate</em>. If the IRR is greater than the hurdle rate, the project is accepted, otherwise it is rejected. When there are more than two IRRs, it is not exactly clear which IRR to compare with the hurdle rate.
Hurdle rate is the minimum required rate of return which businesses use as a benchmark to decide whether to invest in a project or not.
<em>So a typical situation which can generate negative cashflows which can in turn lead to multiple IRRs towards the end of the project is where the conditions of investment become adverse towards the end of the project.</em>
Imagine that toward the end of the lifecycle of a project, a forecasted increase external costs such as Interest Rate, influenced by government policies translates to an erosion of the bottom line generated by the business in that year.
Period 0 1 3 3 4 5
Unconventional cash flows ($)-19,000 16,000 16,000 6,000 6,000 -52,000
The series is non-conventional cash-flow pattern, which has two sign changes. This is the range in which the net present value of the non-conventional cash flow series is positive. The multiple IRR problem poses a series problem to analysts because the decision is not obvious.
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Answer:
Digital Fruit
The expected market price of the common stock after the announcement is:
$20 per share.
Explanation:
Outstanding number of shares = 40 million
Market price of outstanding shares = $20 a share
Total market capitalization = $800 million
Debts introduced = $310 million
Market capitalization after the debt issue = $490 million ($800 - 310 million)
Number of shares bought back = $310 million /$20 = 15,500,000
Outstanding number of shares after the buy-back = 40 million minus 15.5 million
= 24,500,000 shares
Expected market price of the common stock after the announcement
= $490,000,000/24,500,000
= $20 per share
Answer:
Forecast of 2020 net earnings = $299.2 million.
Explanation:
Note:
a. See part a of the attached excel file for the calculations of the Historic Percent of Total Revenue.
b. See part b of the attached excel file for the Forecast of ADP’s 2020 income statement.
From part b of the attached excel file, we have:
Forecast of 2020 net earnings = $299.2 million.
Answer:
(a) How this episode is likely to affect the economic well-being of people in the country
In the short-run, there will be an increase in labor demanded, increasing jobs to build homes and repair the damage caused by the earthquake. In the long-run, things will begin to go back to normal.
(b) How this episode is likely to affect the economy’s measured GDP
In this case, GDP measurements will shift causing less of an input in private spending and an increase in government spending due to subsidies to increase home-building.
Answer:
Before the listing agreement is signed.
Explanation:
A listing agreement is a contract between a property owner and a real estate broker asking the real estate broker to get a buyer for his or her property. The property owner implements the listing agreement so as to empower the real estate broker to act in the capacity of the agent to the owner in the course of trying to sell the property. Generally certain commission is paid to the real estate broker by the property owner.
