Question
In: Finance
2. Consider the following cash flows on two mutually exclusive projects: The cash flows of project...
| 2. Consider the following cash flows on two mutually exclusive projects: The cash flows of project A are expressed in real terms while those of Popject B are expressed in nominal terms. The appropriate nominal discount rate is 11 percent and the inflation rate is 4 percent. Which project should you choose? | |||||||||
| Project A (real cash flow) | Project B (nominal cash flow) | ||||||||
| Year | |||||||||
| 0 | (67,000) | (74,000) | |||||||
| 1 | 34,000 | 34,000 | |||||||
| 2 | 37,000 | 45,000 | |||||||
| 3 | 23,000 | 29,000 | |||||||
| Discount rate | |||||||||
| NPV | |||||||||
Solutions
jeff jeffy answered 6 months agoRelated Solutions
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 +$125Which statement is correct based on the above information about
Projects K and W?a. If the discount rate is 7.5%, accept project W because the
cross-over rate is 9%b. Accept project K, because at a 9% discount rate K and W have
the same net present value.c. If the discount rate is 9.5%, reject project K, because the...
Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0...
Consider the following cash flows on two mutually exclusive
projects:
Year
Project A
Project B
0
–$
68,000
–$
83,000
1
48,000
47,000
2
43,000
56,000
3
38,000
59,000
The cash flows of Project A are expressed in real terms, whereas
those of Project B are expressed in nominal terms. The appropriate
nominal discount rate is 11 percent and the inflation rate is 5
percent. Calculate the NPV for each project. (Do not round
intermediate calculations and round your answers...
Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0...
Consider the following cash flows on two mutually exclusive
projects:
Year
Project A
Project B
0
67000
82000
1
47000
46000
2
42000
55000
3
37000
58000
The cash flows of Project A are expressed in real terms while
those of Project B are expressed in nominal terms. The appropriate
nominal discount rate is 10 percent and the inflation rate is 2
percent.
Calculate the NPV for each project. (Do not round
intermediate calculations and round your answers to...
Consider two mutually exclusive projects with the following cash flows: Project A Project B Time 0...
Consider two mutually exclusive projects with the following cash
flows:
Project A
Project B
Time 0
-10,000
-10,000
Time 1
5,000
4,000
Time 2
5,000
3,000
Time 3
2,000
6,000
At a cost of capital of 8%, which project should the company
choose? Explain which decision rule you should use in this case.
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$140,000The appropriate discount rate is 8.5%.Calculate the internal rate of return (IRR) for both projects, and determine which project should be accepted based on IRR.
Consider the following two mutually exclusive projects withtheir expected Cash Flows ($)Project C0 C1...
Consider the following two mutually exclusive projects with
their expected Cash Flows ($)Project C0 C1 C2 C3A –$100 +$60 +$60 +$60B –$100 ------ ------ +$208.35What is the cross-over rate for these two projects?a. unknown, because the discount rate is unkownb. 28%c. 36%d. 32%e. 15%
Consider the following two mutually exclusive projects: Cash Flows ($) Project C0 C1 C2 C3 A...
Consider the following two mutually
exclusive projects:
Cash Flows ($)
Project
C0
C1
C2
C3
A
-$100
+$60
+$60
+$60
B
-$100
----
----
+$208.35
Calculate the NPV of each project for a discount rate of
14%.
What is approximately the IRR for each project individually?
Use the IRR cross-over method to determine which of the projects
you should accept (describe the correct decision rule describing
when you pick A versus B based on what discount rate).
Consider the following cash flows on two mutually exclusive projects for A- Z motorcars.Assuming both projects...
Consider the following cash flows on two mutually exclusive
projects for A- Z motorcars.Assuming both projects require an
annual return of 11 percent.
year
AZM
Mini-Suv
AFL
Full-Suv
0
- 470000
- 820000
1
324000
354000
2
188000
428000
3
154000
294000
A What is the pay back period for each projects
B What is the NPV for each project
C What is the IRR for each project
Please note Do not do intermediate and run your answers to...
You've estimated the following cash flows (in $) for two mutually exclusive projects: Year Project A...
You've estimated the following cash flows (in $) for two
mutually exclusive projects:
Year
Project A
Project B
0
-5,200
-7,800
1
1,325
1,325
2
2,148
2,148
3
3,640
7,360
The required return for both projects is 8%.
1. What is the IRR for project A?
2. What is the IRR for project B?
3. Which project seems better according to the IRR method?
4. What is the NPV for project A?
5. What is the NPV for project B?...
You've estimated the following cash flows (in $) for two mutually exclusive projects: Year Project A...
You've estimated the
following cash flows (in $) for two mutually exclusive
projects:
Year
Project A
Project B
0
-5,700
-8,550
1
1,325
1,325
2
2,148
2,148
3
4,325
8,384
The required return
for both projects is 8%.
What is the IRR for
project A?
What is the IRR for
project B?
Which project seems
better according to the IRR method?
Project A
Project B
What is the NPV for project A?
What is the NPV for project B?
Which...
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