You are comparing two mutually exclusive projects. The first provides after-tax cash flows of $50,000 per...

You are comparing two mutually exclusive projects. The first provides after-tax cash flows of $50,000 per year for 5 years and costs $100,000 to pursue. The second provides after-tax cash flows of $25,000 per year for 25 years, but those cash flows do not begin until 4 years from now. This project costs $30,000 to pursue. Both projects have a required return of 12%. Select the option below with the correct NPVs and the correct project choice.

NPV1=$80,238.81; NPV2=$94,611.42; choose project 2

NPV1=$80,238.81; NPV2=$166,078.48; choose project 2

NPV1=$71,641.79; NPV2=$65,724.88; choose project 1

None of the above are correct.

Expert Solution

jeff jeffy answered 7 months ago

You are evaluating two mutually exclusive projects. The cash flows for each are:

You are evaluating two mutually exclusive projects. The cash flows for each are: Project A Project B Year 0 ($60,000) ($85,000) Year 1 $20,000 $22,000 Year 2 $35,000 $25,000 Year 3 $20,000 $30,000 Year 4 $25,000 $25,000 Year 5 $15,000 Year 6 $10,000 Year 7 $10,000 Year 8 $10,000 Assume that, if needed, each project is repeatable with no change in cash flows. Your cost of capital is 13%. Using the replacement chain approach, which project would you chose to...

Comparing Investment Criteria. Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber...

Comparing Investment Criteria. Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 8% Year Deepwater Fishing New Submarine Ride 0 -$1,700,000 -$750,000 1 1,100,000 375,000 2 900,000 600,000 3 750,000 390,000 b) Based on the NPV, which project should be taken? c) Based on IRR, which project should be taken?

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...

Consider the following two mutually exclusive projects and their Cash Flows ($)

Consider the following two mutually exclusive projects and their Cash Flows ($)Project C0 C1 C2 C3K –$100 +$45 +$45 +$60 W –$150 +$45 +$45 +$125Which statement is correct based on the above information about Projects K and W?a. If the discount rate is 7.5%, accept project W because the cross-over rate is 9%b. Accept project K, because at a 9% discount rate K and W have the same net present value.c. If the discount rate is 9.5%, reject project K, because the...

Consider the cash flows from two mutually exclusive projects

Use the following information to answer the next three questions. Consider the cash flows from two mutually exclusive projects: Cash FlowYearProject AProject B0-$420,000-$420,0001$140,000$400,0002$230,000$110,0003$331,000$140,000The appropriate discount rate is 8.5%.Calculate the internal rate of return (IRR) for both projects, and determine which project should be accepted based on IRR.

Timco is considering two mutually exclusive projects. Project X costs 105 and provides after-tax inflows of...

Timco is considering two mutually exclusive projects. Project X costs 105 and provides after-tax inflows of 90 per year for 2 years. project I costs 109 and provides after tax inflows of 70 per year for three years. the cost of funds is 8%. Which project should Timco choose? Show numbers to prove your point.

Two mutually exclusive projects have the following forecasted cash flows:

Two mutually exclusive projects have the following forecasted cash flows: Year A B 0 -20,000 -20,000 1 10,000 0 2 10,000 0 3 10,000 0 4 10,000 60,000 Compute the internal rate of return for each project. Compute the NPV for each project if the required rate is 10%. Which project should be accepted, and why?

Part A) Two projects are mutually exclusive if the cash flows of one are unaffected by...

Part A) Two projects are mutually exclusive if the cash flows of one are unaffected by the acceptance of the other, but independent if the cash flows of one can be adversely impacted by the acceptance of the other. True False Part B) Which of the following statements is correct? Capital rationing occurs when a company chooses to fund all positive NPV projects. A company typically sets no limit on the total amount of capital expenditures that it will make...

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.?

Suppose that you have two mutually exclusive projects. A and B. Project A has cash flows...

Suppose that you have two mutually exclusive projects. A and B. Project A has cash flows of CF0, CF1, CF2, CF3, CF4, CF5. (Years 0-5). Project B has cash flow of CF0, CF1, CF2, CF3. The discount rate for the projects is 10.5%. a) Analyze these two projects and recommend a project to accept. b) Carefully outline all your analysis and reasoning and discuss your methodologies for arriving at your solution in detail. Project A Project B CF0 (4,650.00) (8,300.00)...

Question