Question
In: Finance
Wilson’s Market is considering two mutually exclusive projects that will not be repeated. The required rate...
Wilson’s Market is considering two mutually exclusive projects that will not be repeated. The required rate of return is 13.9 percent for Project A and 12.5 percent for Project B.
Project A has an initial cost of $54,500, and should produce cash inflows of $16,400, $28,900, and $31,700 for Years 1 to 3, respectively.
Project B has an initial cost of $69,400, and should produce cash inflows of $0, $48,300, and $42,100, for Years 1 to 3, respectively.
Based on IRR, which project, if either, should be accepted and why? Based on the Payback Period, which project should be accepted if the cutoff point is 2.5 years.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Wilson’s Market is considering two mutually exclusive projects that will not be repeated. The required rate...
Wilson’s Market is considering two mutually exclusive projects
that will not be repeated. The required rate of return is 13.9
percent for Project A and 12.5 percent for Project B. Project A has
an initial cost of $54,500, and should produce cash inflows of
$16,400, $28,900, and $31,700 for Years 1 to 3, respectively.
Project B has an initial cost of $69,400, and should produce cash
inflows of $0, $48,300, and $42,100, for Years 1 to 3,
respectively. Based on...
You are considering the following two mutually exclusive projects that will not be repeated. The required...
You are considering the following two mutually exclusive
projects that will not be repeated. The required rate of return is
11.25% for project A and 10.75% for project B. Which project should
you accept and why?
Year Project A Project B
0 -48,000 -126,900
1 18,400 69,700
2 31,300 80,900
3 11,700 0
project A; because its NPV is about $335 more than the NPV of
project B
project A; because it has the higher required rate of return
project...
Considering two mutually exclusive projects. The crossover rate between these two projects is ___ percent and...
Considering two mutually exclusive projects. The crossover rate
between these two projects is ___ percent and Project ___ should be
accepted if the required return is less than the crossover
rate.
Year
Project A
Project B
0
−$27,000
−$27,000
1
10,000
18,100
2
10,000
8,000
3
18,000
10,120
11.75%; A
11.75%; B
17.19%; B
18.64%; A
17.19%; A
You are considering the following two mutually exclusive projects. The crossover rate between these two projects...
You are considering the following two mutually exclusive
projects. The crossover rate between these two projects is ___
percent and Project ___ should be accepted if the required return
is greater than the crossover rate.
Year
Project A
Project B
0
−$26,000
−$26,000
1
9,500
17,590
2
9,500
7,500
3
17,500
9,610
rev: 05_02_2019_QC_CS-167236, 05_09_2019_QC_CS-168369,
09_24_2019_QC_CS-182411
Multiple Choice
18.39%; A
11.89%; B
16.97%; B
11.89%; A
16.97%; A
You are considering the following two mutually exclusive projects. The crossover rate between these two projects...
You are considering the following two mutually exclusive
projects. The crossover rate between these two projects is ___
percent and Project ___ should be accepted if the required return
is greaterthan the crossover rate.
Year
Project A
Project B
0
−$30,000
−$30,000
1
11,500
19,630
2
11,500
9,500
3
19,500
11,650
You are considering the following two mutually exclusive projects. The crossover rate between these two projects...
You are considering
the following two mutually exclusive projects. The crossover rate
between these two projects is ___ percent and Project ___ should be
accepted if the required return is greater than the crossover
rate.
Year
Project A
Project B
0
−$24,000
−$24,000
1
8,500
16,570
2
8,500
6,500
3
16,500
8,590
Multiple Choice
12.17%; B
12.17%; A
17.82%; A
16.49%; A
16.49%; B
You are considering the following two mutually exclusive projects. The crossover rate between these two projects...
You are considering the following two mutually exclusive
projects. The crossover rate between these two projects is ___
percent and Project ___ should be accepted if the required return
is greater than the crossover rate.
Year
Project A
Project B
0
−$39,000
−$39,000
1
21,500
13,720
2
13,500
11,500
3
13,500
25,600
12.85%; B
12.52%; A
12.52%; B
12.93%; A
12.93%; B
You are considering the following three mutually exclusive projects. The required rate of return for all...
You are considering the following three mutually exclusive
projects. The required rate of return for all three projects is
14%.
Year A B C
0 $ (1,000) $(5,000) $(50,000)
1 $ 300 $ 1,700 $ 0
2 $300 $ 1,700 $15,000
3 $ 600 $1,700 $ 28,500
4 $300 $1,700 $ 33,000
What is the IRR of the best project? % terms to 2 decimal places
w/o % sign
A company is considering two mutually exclusive projects, the company’s required return is 8 percent and...
A company is considering two mutually exclusive projects, the
company’s required return is 8 percent and they do not have any
capital constraints. Based on the profitability index, what is your
recommendation concerning these projects?
Project A Project
B
Year
Cash
Flow Year
Cash Flow
0 -$38,500 0 -$42,000
1 $20,000 1
$10,000
2 $24,000 2
$40,000
Neither project is acceptable.
You should accept both projects since both of their PIs are
greater than 1.
You should accept project A since it has the higher PI.
You should accept...
You are considering the following two mutually exclusive projects. The required return on each project is...
You are considering the following two mutually exclusive
projects. The required return on each project is 14 percent. Which
project should you accept and what is the best reason for that
decision?
Year
Project A
Project B
0
−$
24,000
−$
21,000
1
9,500
6,500
2
16,200
9,800
3
8,700
15,200
Project A; because it pays back faster
Project A; because it has the higher profitability index
Incorrect
Project B; because it has the higher profitability index
Project B; because...
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