Question

In: Finance

Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....

Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15%. Year Deepwater Fishing New Submarine Ride 0 -600,000 -1,800,000 1 270,000 1,000,000 2 350,000 700,000 3 300,000 900,000 as a financial analyst for BRC, you are asked the following questions: a. Based on the discounted payback period rule, which project should be chosen? b. If your decision rule is to accept the project with the greater IRR, which project should you use? c. Since you are fully aware of the IRR rule’s scale problem, you calculate the modified IRR (MIRR) for the two projects. Based on your computation, which project should you choose? d. To be prudent, you compute the NPV for both projects. Which project should you choose? Is it consistent with the MIRR rule?

Solutions

Expert Solution


Related Solutions

Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15%. Year Deepwater Fishing New Submarine Ride year0 -600,000 -1,800,000 year1 270,000 1,000,000 year2 350,000 700,000 year3 300,000 900,000 as a financial analyst for BRC, you are asked the following questions: a. Based on the discounted payback period rule, which project should be chosen? b. If your decision rule is to accept the project with the greater...
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15%. Year Deepwater Fishing New Submarine Ride 0 -600,000 -1,800,000 1 270,000 1,000,000 2 350,000 700,000 3 300,000 900,000 as a financial analyst for BRC, you are asked the following questions: a. Based on the discounted payback period rule, which project should be chosen? b. If your decision rule is to accept the project with the greater...
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15%. Year Deepwater Fishing New Submarine Ride 0 -600,000 -1,800,000 1 270,000 1,000,000 2 350,000 700,000 3 300,000 900,000 as a financial analyst for BRC, you are asked the following questions: a. Based on the discounted payback period rule, which project should be chosen? b. If your decision rule is to accept the project with the greater...
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15%. Deepwater fishing Year 0 -600,000 year 1 270,000 year 2 350,000 year 3 300,000 Fishing New Submarine Ride year 0 -1,800,000 year 1 1,000,000 year2 700,000 year3 900,000 as a financial analyst for BRC, you are asked the following questions: a. Based on the discounted payback period rule, which project should be chosen? b. If your...
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15%. Year Deepwater Fishing New Submarine Ride 0 -600,000 -1,800,000 1 270,000 1,000,000 2 350,000 700,000 3 300,000 900,000 as a financial analyst for BRC, you are asked the following questions: a. Based on the discounted payback period rule, which project should be chosen? b. If your decision rule is to accept the project with the greater...
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15%. Year Deepwater Fishing New Submarine Ride 0 -600,000 -1,800,000 1 270,000 1,000,000 2 350,000 700,000 3 300,000 900,000 as a financial analyst for BRC, you are asked the following questions: a. Based on the discounted payback period rule, which project should be chosen? b. If your decision rule is to accept the project with the greater...
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15%. Year Deepwater Fishing New Submarine Ride 0 -600,000 -1,800,000 1 270,000 1,000,000 2 350,000 700,000 3 300,000 900,000 as a financial analyst for BRC, you are asked the following questions: a. Based on the discounted payback period rule, which project should be chosen? b. If your decision rule is to accept the project with the greater...
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15%. Year Deepwater Fishing New Submarine Ride 0 -600,000 -1,800,000 1 270,000 1,000,000 2 350,000 700,000 3 300,000 900,000 as a financial analyst for BRC, you are asked the following questions: a. Based on the discounted payback period rule, which project should be chosen? b. If your decision rule is to accept the project with the greater...
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15%. Year Deepwater Fishing New Submarine Ride 0 -600,000 -1,800,000 1 270,000 1,000,000 2 350,000 700,000 3 300,000 900,000 as a financial analyst for BRC, you are asked the following questions: a. Based on the discounted payback period rule, which project should be chosen? b. If your decision rule is to accept the project with the greater...
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC)....
Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 17 percent.    Year Deepwater Fishing New Submarine Ride 0 −$ 1,020,000 −$ 1,990,000 1 440,000 1,040,000 2 566,000 870,000 3 490,000 890,000    a-1. Compute the IRR for both projects. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)        a-2. Based on the IRR, which...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT