Question
In: Finance
CJ Lance Co. (Ch 10) CJ Lance Co. is considering two Mutually Exclusive Projects Project Alpha-1...
CJ Lance Co. (Ch 10) CJ Lance Co. is considering two Mutually Exclusive Projects Project Alpha-1 is expected to generate cash flows of $3,250 each year of its 5 year life. The project will cost $11,000. Project Beta-2 is expected to produce $8,000 in cash flows per year. It also has a 5 year life, and costs $27,750. The Cost of Capital is 12% and these projects are of normal risk.
a. Calculate the NPV, IRR, and MIRR for each of the projects.
b. Given that they are mutually exclusive, which project should be selected based on each ranking method?
c. Now which project should be chosen? Why?
Solutions
jeff jeffy answered 15 hours agoRelated Solutions
Eagle Fly Co. is considering two mutually exclusive projects. Project A has an up-front cost of...
Eagle Fly Co. is considering two mutually exclusive projects.
Project A has an up-front cost of $260,000 (CF0 = -260,000), and
produces positive after-tax cash inflows of $64,000 a year at the
end of each of the next six years. Project B has an up-front cost
of $190,000(CF0 = -190,000) and produces after-tax cash inflows of
$64,500 a year at the end of the next four years. Assuming the cost
of capital is 10.5%,
1. Compute the equivalent annual annuity...
The Winston Co. is considering two mutually exclusive projects with the following cash flows: &nbs
The Winston Co. is considering two mutually exclusive projects
with the following cash flows:
Project
A
Project B
Year
Cash
Flow
Cash Flow
0
-$75,000
-$60,000
1
$30,000
$25,000
2
$35,000
$30,000
3
$35,000
$25,000
B-1
what is the IRR of project A?
B-2
What is the IRR of project B?
B-3
Based on the IRR rule, which project should be accepted and
why?
B-4...
You are considering the following two mutually exclusive projects. YEAR PROJECT (A) PROJECT (B) 0&
You are considering the following two mutually exclusive
projects.
YEAR
PROJECT
(A) PROJECT
(B)
0
-$35,000
-$35,000
1
22,000
13,000
2
20,000
21,000
3
13,000
22,000
What is the internal rate of return of PROJECT A?
You are considering the following two mutually exclusive projects. YEAR PROJECT (A) PROJECT (B) 0&
You are considering the following two mutually exclusive
projects.
YEAR
PROJECT
(A) PROJECT
(B)
0
-$35,000
-$35,000
1
22,000
13,000
2
20,000
21,000
3
13,000
22,000
What is the crossover point?
You are considering two mutually exclusive projects. The NPV for project one is positive and higher...
You are considering two mutually exclusive projects. The NPV for
project one is positive and higher than the NPV for project two,
while the IRR for project two is higher than that for project one.
Which project should the firm accept and why?
. Marian Ltd is considering two mutually exclusive projects with the following details: PROJECT A Initial...
. Marian Ltd is considering two mutually exclusive projects with
the following details: PROJECT A Initial Investment $450,000 Scrap
value in year 5 $20,000 Year 1 2 3 4 5 $000 $000 $000 $000 $000
Annual Cash Flows 200 150 100 100 100 PROJECT B Initial Investment
$100,000 Scrap value in year 5 $10,000 Year 1 2 3 4 5 $000 $000
$000 $000 $000 Annual Cash Flow 50 40 30 20 20 Assume that the
initial investments at the...
You are considering two mutually exclusive projects, A and B. Project A costs $70,000 and generates...
You are considering two mutually exclusive projects, A and
B.
Project A costs $70,000 and generates cash flows of $10,000 for
10 years.
Project B costs $80,000 and generates cash flows of $2,000 for
six years and then cash flows of $28,000 for four years.
Report rates in percentage form to two decimal places i.e.
10.03% not 10%
At what discount rate would make you indifferent between
choosing one project or another?
What is the highest discount rate in which...
Your firm is considering two projects that are mutually exclusive. Each project will require an initial...
Your firm is considering two projects that are mutually
exclusive. Each project will require an initial outlay of $200,000.
The forecast yearly cash flows are shown below. Time Project A
Project B 0 -200,000 -200,000 1 -25,000 120,000 2 80,000 80,000 3
100,000 40,000 4 140,000 25,000
a) Calculate the payback period (undiscounted) of each project.
Include fractional periods (e.g., x.xx years) in your response, if
applicable. b) Calculate the IRR of each project. c) Calculate the
Modified IRR (MIRR)...
Marian Ltd is considering two mutually - exclusive projects with the following details: Project A Initial...
Marian Ltd is considering two mutually - exclusive projects with
the following details:
Project A Initial investment Le 450,000
Scrape value in year 5 Le 20,000 Year 1 2 3 4 5
( Le000) ( Le000 ) (Le000) (Le000) ( Le000)
Annual Cash flows 200 150 100 100 100
Project B:
Initial investment Le 100,000
Scrape value in year 5 Le10,000
Year 1 2 3 4 5
( Le000 ) ( Le000 ) ( Le000) ( Le000) ( Le000 )...
Marian Ltd is considering two mutually - exclusive projects with the following details: Project A Initial...
Marian Ltd is considering two mutually - exclusive projects with
the following details:
Project A
Initial investment Le 450,000
Scrape value in year 5 Le 20,000
Year 1 2 3 4 5
( Le000) ( Le000 ) (Le000) (Le000) ( Le000)
Annual Cash flows 200 150 100 100 100
Project B:
Initial investment Le 100,000
Scrape value in year 5 Le10,000
Year 1 2 3 4 5
( Le000 ) ( Le000 ) ( Le000) ( Le000) ( Le000 )...
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