How do you calculate the required rate of return of a project? - ProProfs Discuss
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How do you calculate the required rate of return of a project?

How do you calculate the required rate of return of a project?

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Asked by Wyatt Williams, Last updated: Nov 09, 2024

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f.Brian

f.Brian

f.Brian
F.Brian

Answered Jan 28, 2018

If a project’s initial cost is 100 million dollars and the required rate of return is 10 percent and in three subsequent years the cash inflow is as follows: Year one= 20 million dollars. Year two= 50 million dollars. Year three= 40 million dollars and we know that the financing cost is 2% a CFA would need to know the NPV and to determine if the project should be accepted or rejected. Keep in mind that a CFA is a charter financial analyst and NPV refers to net present value. The net present value would be -10.44 and the project should be rejected.

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John Smith

John Smith

John Smith
John Smith

Answered Oct 25, 2016

-10.44, Reject
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