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Accounting, Finance, SPSS
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English (U.S.)
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Topic:
The Capital Assets Pricing Model
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The Capital Assets Pricing Model
ECO202: Macroeconomics
Part I: Capital Budgeting Practice Problems a. Consider the project with the following expected cash flows:
Part I: Capital Budgeting Practice Problems a. Consider the project with the following expected cash flows:
| Year | Cash flow |
| 0 | -$400,000 |
| 1 | $100,000 |
| 2 | $120,000 |
| 3 | $850,000 |
- If the discount rate is 0%, what is the project's net present value?
- If the discount rate is 2%, what is the project's net present value?
- If the discount rate is 6%, what is the project's net present value?
- If the discount rate is 11%, what is the project's net present value?
- With a cost of capital of 5%, what is this project's modified internal rate of return?
| Discount | Discounted | |||
| Year | Cash flow | Rate | PVIF | Cash Flow |
| 0 | ($400,000) | 0% | 1 | ($400,000) |
| 1 | $100,000 | 0% | 1 | $100,000 |
| 2 | $120,000 | 0% | 1 | $120,000 |
| 3 | $850,000 | 0% | 1 | $850,000 |
| NPV | $670,000 |
| Discount |
D...
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