Question

In: Finance

Bumble’s Bees, Inc., has identified the following two mutually exclusive projects: Bumble’s Bees, Inc., has identified...

Bumble’s Bees, Inc., has identified the following two mutually exclusive projects:

Bumble’s Bees, Inc., has identified the following two mutually exclusive projects:

Year

Cash Flow (A)

Cash Flow (B)

0

-17,000

-17,000

1

8,000

2,000

2

7,000

5,000

3

5,000

9,000

4

3,000

9,500
  1. Calculate the Internal Rate of Return (IRR) for each of the project using Trial and Error method.
  2. Apply the IRR decisionrule, which project should the company accept?
  3. If the required return is 11 percent, evaluate the NPV for each of these projects?
  4.   Which project will you choose if you apply the NPV decision rule?
  5. Manager of Bumble’s Bees, Inc want to know the payback period of each project. Make necessary calculations to find the payback period of Project A and Project B.

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Bumble’s Bees, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash...
Bumble’s Bees, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -17,000 -17,000 1 8,000 2,000 2 7,000 5,000 3 5,000 9,000 4 3,000 9,500 What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 11%, what is the NPV for each of these projects? Which project will you choose...
Garage, Inc., has identified the following two mutually exclusive projects. The required rate of return on...
Garage, Inc., has identified the following two mutually exclusive projects. The required rate of return on both projects is 12%. Which project should the company choose and why? Year Cash Flow (A) Cash Flow (B) 0 -$29,000 -$29,000 1 14,400 4,400 2 12,300 9,800 3 9,200 18,500 4 8,100 16,800 A: Choose A because project A has a higher IRR B: Choose B because project B has a higher NPV C: Choose B because project B has shorter payback period...
Respond to the following: Parkallen Inc. has identified the following two mutually exclusive projects: Year Cash...
Respond to the following: Parkallen Inc. has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$29,000 -$29,000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 11%, what is the NPV for each of these projects? Which project will the...
Garage, Inc., has identified the following two mutually exclusive projects:     Year Cash Flow (A) Cash...
Garage, Inc., has identified the following two mutually exclusive projects:     Year Cash Flow (A) Cash Flow (B) 0 –$ 29,500 –$ 29,500 1 14,900 4,550 2 12,800 10,050 3 9,450 15,700 4 5,350 17,300    a-1 What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)    IRR   Project A %   Project B %    a-2 Using the IRR decision rule, which...
Garage, Inc., has identified the following two mutually exclusive projects:     Year Cash Flow (A) Cash...
Garage, Inc., has identified the following two mutually exclusive projects:     Year Cash Flow (A) Cash Flow (B) 0 –$ 29,100 –$ 29,100 1 14,500 4,350 2 12,400 9,850 3 9,250 15,300 4 5,150 16,900    a-1 What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)    IRR   Project A %   Project B %    a-2 Using the IRR decision rule, which...
Mahjong, Inc., has identified the following two mutually exclusive projects:    Year Cash Flow (A) Cash...
Mahjong, Inc., has identified the following two mutually exclusive projects:    Year Cash Flow (A) Cash Flow (B) 0 –$36,300        –$36,300        1 18,600        6,400        2 14,100        12,900        3 11,600        19,400        4 8,600        23,400          Required: (a) What is the IRR for Project A? (Click to select)  18.76%  19.16%  19.75%  20.34%  20.74%    (b) What is the IRR for Project B? (Click to select)  21.63%  19.98%  20.6%  21.22%  19.57%    (c) If the required return is 11 percent, what is the...
Bruin, Inc., has identified the following two mutually exclusive projects:    Year Cash Flow (A) Cash...
Bruin, Inc., has identified the following two mutually exclusive projects:    Year Cash Flow (A) Cash Flow (B) 0 –$36,200        –$36,200        1 18,700        6,300        2 14,200        12,800        3 11,700        19,300        4 8,700        23,300          a. What is the IRR for Project A?    b. What is the IRR for Project B?    c. If the required return is 10 percent, what is the NPV for Project A?    d. If...
Bruin, Inc., has identified the following two mutually exclusive projects:     Year Cash Flow (A) Cash...
Bruin, Inc., has identified the following two mutually exclusive projects:     Year Cash Flow (A) Cash Flow (B) 0 –$ 28,000 –$ 28,000 1 13,400 3,800 2 11,300 9,300 3 8,700 14,200 4 4,600 15,800 A) What is the IRR for each of these projects? B) Using the IRR decision rule, which project should the company accept? C) Is this decision necessarily correct? D) If the required return is 10 percent, what is the NPV for each of these projects?...
The director of capital budgeting for Giant Inc. has identified two mutually exclusive projects, L and...
The director of capital budgeting for Giant Inc. has identified two mutually exclusive projects, L and S, with the following expected net cash flows: Expected Net Cash Flows Year Project L Project S 0 ($100) ($100) 1 10 70 2 60 50 3 80 20 Both projects have a cost of capital of 12 percent. What is Project S's MIRR? What is Project L's MIRR?
   Hungry Hoagie's has identified the following two mutually exclusive projects. The required rate of the...
   Hungry Hoagie's has identified the following two mutually exclusive projects. The required rate of the return for the projects is 13%. Year Cash Flow (A) Cash Flow (B) 0 ($36,800.00) ($36,800.00) 1 $19,150.00 $6,670.00 2 $14,650.00 $13,170.00 3 $12,150.00 $19,670.00 4 $9,150.00 $23,670.00 a. What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct? Calculate all values to two decimal places. b. If the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT