Question
In: Finance
Chestnut Tree Farms has identified the following two mutually exclusive projects. The company uses a discount...
Chestnut Tree Farms has identified the following two mutually exclusive projects. The company uses a discount rate of 6%.
|
Year |
Cash Flow (A) |
Cash Flow (B) |
|||||
|
0 |
−$ |
40,000 |
−$ |
40,000 |
|||
|
1 |
11,300 |
17,400 |
|||||
|
2 |
14,800 |
14,100 |
|||||
|
3 |
13,700 |
12,900 |
|||||
|
4 |
7,900 |
2,200 |
|||||
- What is the IRR of each project? Based on the IRR criterion, which project(s) would you choose?
- What is the NPV of each project? Based on the NPV method which project(s) would you choose?
- What is your final choice of project?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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
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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...
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
Calculate the Internal Rate of Return (IRR) for each of the
project using Trial and Error method.
Apply the IRR decisionrule, which project should the company
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If the required return is 11 percent, evaluate the...
AngryBaby Company has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow...
AngryBaby Company has identified the following two mutually
exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
-$43,500
-$43,500
1
21,410
6,400
2
18,450
14,300
3
13,800
22,900
4
6,900
25,000
What is the IRR for each of these projects (Excel or financial
calculator is required)? Using the IRR decision rule, which project
should the company accept? If the required return is 14 percent,
what is the NPV for each of these projects? Which project will the
company choose...
An investor has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash...
An investor has identified the
following two mutually exclusive projects:
Year
Cash Flow
(A)
Cash Flow
(B)
0
–$39,000
–$39,000
1
19,200
5,800
2
14,700
12,300
3
12,200
18,800
4
9,200
22,800
Required:
(a)
What is the IRR for
Project A?
(b)
What is the IRR for
Project B?
(c)
If the required
return is 9 percent, what is the NPV for Project A?
(d)...
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...
Strand Plc has the following two mutually exclusive projects available to invest in. the discount rate...
Strand Plc has the following two mutually exclusive projects
available to invest in. the discount rate is 10%. Each project can
be undertaken only once.
Cash flows
Project Initial cost Year 1 Year 2 Year 3
1 (500) 400 200 100
2 (1000) 500 400 500
Required:
(a) Calculate the payback period for each of the projects. Based
upon the payback criterion which project should be chosen?
(b) Calculate the net present value (NPV) of each...
The Camel Company is considering two mutually exclusive projects with the following cash flows. Assume discount...
The Camel Company is considering two mutually exclusive projects
with the following cash flows. Assume discount rate of 12%.
Compute NPV, IRR, PI. Assume the discount rate is 12%. Please
recommend the firm which project(s) to choose under the following
scenarios:
Year
Project A cash flow
Project B Cash flow
0
-75,000
$-60,000
1
$30,000
$25,000
2
$35,000
$30,000
3
$35,000
$25,000
Assume Independent
Projects: (i) which project(s) would you recommend? (ii) Would your
answer change if the firm...
Garage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash...
Garage, Inc., has identified the
following two mutually exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
–$
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...
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