Question
In: Finance
(Time-disparity problem) The State Spartan Corporation is considering two mutually exclusive projects. The free cash flows...
(Time-disparity problem) The State Spartan Corporation is considering two mutually exclusive projects. The free cash flows associated with these projects are shown in the popup window: LOADING.... The required rate of return on these projects is 10 percent.
a. What is each project's payback period?
b. What is each project's NPV?
c. What is each project's IRR?
d. What has caused the ranking conflict?
e. Which project should be accepted? Why?
|
PROJECT A |
PROJECT B |
||||
|
Initial outlay |
-$50,000 |
-$50,000 |
|||
|
Inflow year 1 |
15,625 |
0 |
|||
|
Inflow year 2 |
15,625 |
0 |
|||
|
Inflow year 3 |
15,625 |
0 |
|||
|
Inflow year 4 |
15,625 |
0 |
|||
|
Inflow year 5 |
15,625 |
100,000 |
|||
Solutions
jeff jeffy answered 11 months agoRelated Solutions
(Time-disparity problem) The State Spartan Corporation is considering two mutually exclusive projects. The free cash flows...
(Time-disparity problem)
The State Spartan Corporation is considering two mutually
exclusive projects. The free cash flows associated with these
projects are shown in the popup window:
PROJECT A
PROJECT B
Initial outlay
−$50,000
−$50,000
Inflow year 1
15,625
0
Inflow year 2
15,625
0
Inflow year 3
15,625
0
Inflow year 4
15,625
0
Inflow year 5
15,625
100,000
The required rate of return on these projects is 10
percent.
a. What is each project's payback period?
b. What is...
(Time-disparity problem) The State Spartan Corporation is considering two mutually exclusive projects. The free cash flows...
(Time-disparity problem) The State Spartan Corporation is
considering two mutually exclusive projects. The free cash flows
associated with these projects are shown in the popup window:
LOADING.... The required rate of return on these projects is 7
percent.
a. What is each project's payback period?
b. What is each project's NPV?
c. What is each project's IRR?
d. What has caused the ranking conflict?
e. Which project should be accepted? Why?
PROJECT A
PROJECT B
Initial outlay
-70,000
-70,000
Inflow...
( Time-disparity problem ) The State Spartan Corporation is considering two mutually exclusive projects. The free...
( Time-disparity problem ) The State Spartan Corporation is
considering two mutually exclusive projects. The free cash flows
associated with these projects are shown in the popup window:
PROJECT A
PROJECT B
Initial outlay
− $70,000
− $70,000
Inflow year 1
19,625
0
Inflow year 2
19,625
0
Inflow year 3
19,625
0
Inflow year 4
19,625
0
Inflow year 5
19,625
120,000
The required rate of return on these projects is 9 percent.
A. What is each project's payback...
Consider the following cash flows of two mutually exclusive projects for Spartan Rubber Company. Assume the...
Consider the following cash flows of two mutually exclusive
projects for Spartan Rubber Company. Assume the discount rate for
both projects is 7 percent.
Year
Dry Prepreg
Solvent Prepreg
0
–$
1,890,000
–$
900,000
1
1,119,000
470,000
2
938,000
790,000
3
769,000
428,000
a. What is the payback period for each project?
(Do not round intermediate calculations and round your
answers to 2 decimal places, e.g., 32.16.)
Payback period
Dry Prepreg
years
Solvent Prepreg
years
b. What is the NPV...
Consider the following cash flows of two mutually exclusive projects for Spartan Rubber Company. Assume the...
Consider the following cash flows of two mutually exclusive
projects for Spartan Rubber Company. Assume the discount rate for
both projects is 8 percent.
Year
Dry Prepreg
Solvent Prepreg
0
–$
1,810,000
–$
805,000
1
1,111,000
430,000
2
922,000
710,000
3
761,000
412,000
a. What is the payback period for each project?
(Do not round intermediate calculations and round your
answers to 2 decimal places, e.g., 32.16.)
Payback period
Dry Prepreg
1.92 1.92
Incorrect years
Solvent Prepreg
2.20 2.20
Incorrect...
Harris Corporation is considering the following two mutually exclusive projects with their projected cash flows: &nb
Harris Corporation is considering the following two mutually
exclusive projects with their projected cash flows:
Year Project
A Project
B
0
($10,000)
($10,000)
1
4,500
0
2
4,500
0
3
4,500
15,000
If the required return on these projects is 10 percent, which
would be chosen and why?
Group of answer choices
Project A because of higher IRR
Project B because of higher NPV
Project B because of higher IRR
Project...
Comparing Investment Criteria. Consider the following cash flows of two mutually exclusive projects for Spartan Rubber...
Comparing Investment Criteria. Consider the following cash flows
of two mutually exclusive projects for Spartan Rubber
company. Assume the discount rate for both projects is
10 percent.
a. Based on the payback period, which project should be
taken?
b. Based onthe NPV, which project should be taken?
c. Based on the IRR, which project should be
taken?
d. Based on the above analysis, is incremental IRR
analysis necessary? If yes, please conduct the
analysis.
Year
Dry Prepreg
Solvent Prepreg
0
(1,800,000)
(925,000)
1
690,000...
Jamison is considering two mutually exclusive projects with the following cash flows and the cost of...
Jamison is considering two mutually exclusive projects with the
following cash flows and the cost of capital of 10%.
Year XX YY
0 -$1,000 -$1,200
1 $800 $700
2 $800 $700
3 $700
a) Based on Annualized NPV, which project would you choose? Why
ANPV is better than NPV in this case.?
A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:...
A firm is considering two mutually exclusive projects, X and Y,
with the following cash flows: 0 1 2 3 4 Project X -$1,000 $110
$300 $400 $700 Project Y -$1,000 $900 $100 $55 $45 The projects are
equally risky, and their WACC is 10%. What is the MIRR of the
project that maximizes shareholder value? Round your answer to two
decimal places. Do not round your intermediate calculations.
A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:...
A firm is considering two mutually exclusive projects, X and Y,
with the following cash flows:
0
1
2
3
4
Project X
-$1,000
$100
$300
$400
$650
Project Y
-$1,000
$1,000
$110
$45
$55
The projects are equally risky, and their WACC is 10%. What is
the MIRR of the project that maximizes shareholder value? Do not
round intermediate calculations. Round your answer to two decimal
places.
%_____
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