corporate finance

Finance Junkie
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Joined: Mon Oct 06, 2014 7:36 am

corporate finance

Postby chandniwadhwani92 » Fri Nov 21, 2014 6:49 pm

Q-1 Firm with limited access to additional liquidity often impose a maximum payback period then use a measure of profitability such as npv and irr to evaluate project that satisfy maximum payback period constraints
What does this sentence means? limited access to liquidity

Q-2 How projects with mo IRR are profitable projects?

Finance Junkie
Posts: 706
Joined: Wed Apr 09, 2014 6:28 am

corporate finance

Postby edupristine » Wed Nov 26, 2014 10:44 am

It means a limited ability to issue financing's in a sufficient and timely manner when necessary. Project with no IRR example:-
Year 1: $200,000

Year 2: -$600,000

Year 3: $500,000

It’s a profitable project - if your discount rate is 0% the NPV is $100,000; if your discount rate is 10% the NPV is $67,769 - but there is no IRR.

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