Question
In: Finance
You are considering two mutually exclusive (you can do one or the other – not both)...
You are considering two mutually exclusive (you can do one or the other – not both) projects with the following cash flows. Using NPV and IRR, which project should you accept if the discount rate is 5 percent? What if the discount rate is 10 percent?
|
Year |
Project A |
Project B |
|
0 |
-$200,000 |
-$200,000 |
|
1 |
100,000 |
0 |
|
2 |
100,000 |
0 |
|
3 |
100,000 |
300,000 |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
You are considering the following two mutually exclusive projects. If the cost of capital for both...
You are considering the following two mutually exclusive
projects. If the cost of capital for both projects is 7%, which
statement concerning capital-budgeting rules listed will be correct
in this situation?
Time
Year
0
Year
1
Year
2
Year
3
Project
A
-
$567
$300
$400
$300
Project
B
-
$296
$500
$100
$50
a)
Both NPV and IRR will choose the correct
project(s).
b)
Neither NPV nor IRR will choose the correct project(s).
c)
NPV will choose the correct...
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?
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%.
(1). (4...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%
a....
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%.
(4). What...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%.
(4). What...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%.
(7). (4...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%
Q1:(4 points)...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Project A Project
B
Year Cash Flow Year Cash Flow
0 -$45,000 0 $-40,000
1 $17,500 1 $8,200
2 $18,000 2 $ 14,600
3 $22,500 3 $ 36,800
Required Rate of Return
Project A- 8% Project B- 12%
Required Payback Period
Project...
Pepsico is considering two mutually exclusive projects. Both require an initial investment of $10,000, and their...
Pepsico is considering two mutually exclusive projects. Both
require an initial investment of $10,000, and their risks are
average for the firm. Project X has an expected life of 2 years
with after-tax cash inflows of $5,300 and $7,000 at the end of
Years 1 and 2, respectively. Project Y has an expected life of 4
years with after-tax cash inflows of $3,700 at the end of each of
the next 4 years. The firm's WACC is 8%. Use the...
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