Suppose you aren’t sure of Corporate k. At what k would B and B* have the same NPV?

Get differences:

CF0 = 200,000 - 2000,000 = 0

CF1- 5 = 56,863 - 35,397 = 21,466

CF6-10 = 0 - 35,397 = -35,397

Indifference k = IRR = 10.52%

Previous slide

Next slide

Back to first slide

View graphic version