Question
In: Finance
Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0...
Consider the following cash flows on two mutually exclusive projects:
| Year | Project A | Project B | ||
| 0 | –$ | 68,000 | –$ | 83,000 |
| 1 | 48,000 | 47,000 | ||
| 2 | 43,000 | 56,000 | ||
| 3 | 38,000 | 59,000 | ||
The cash flows of Project A are expressed in real terms, whereas those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 11 percent and the inflation rate is 5 percent. Calculate the NPV for each project. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0...
Consider the following cash flows on two mutually exclusive
projects:
Year
Project A
Project B
0
67000
82000
1
47000
46000
2
42000
55000
3
37000
58000
The cash flows of Project A are expressed in real terms while
those of Project B are expressed in nominal terms. The appropriate
nominal discount rate is 10 percent and the inflation rate is 2
percent.
Calculate the NPV for each project. (Do not round
intermediate calculations and round your answers to...
Consider two mutually exclusive projects with the following cash flows: Project A Project B Time 0...
Consider two mutually exclusive projects with the following cash
flows:
Project A
Project B
Time 0
-10,000
-10,000
Time 1
5,000
4,000
Time 2
5,000
3,000
Time 3
2,000
6,000
At a cost of capital of 8%, which project should the company
choose? Explain which decision rule you should use in this case.
Mutually exclusive investments. The following are cash flows of two projects. Year Project A Project B 0...
Mutually exclusive investments.
The following are cash flows of two projects.
Year Project A Project B
0 $ (200) $ (200)
1 80 100
2 80 100
3 80 100
4 80
Calculate the NPV for both projects if the discount rate is
11%(Do not intermediate calculations.Round your answer to 2 decimal
places)
Suppose that you can only choose one of the these projects.
Which would you choose ?
project A
Project B
Neither
2. Consider the following cash flows on two mutually exclusive projects: The cash flows of project...
2.
Consider the following cash flows on two mutually exclusive
projects: The cash flows of project A are expressed in real terms
while those of Popject B are expressed in nominal terms. The
appropriate nominal discount rate is 11 percent and the inflation
rate is 4 percent. Which project should you
choose?
Project A (real cash flow)
Project B (nominal cash flow)
Year
0
(67,000)
(74,000)
1
34,000
34,000
2
37,000
45,000
3
...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$...
Consider the following two mutually exclusive
projects:
Year
Cash Flow (A)
Cash Flow (B)
0
–$
364,000
–$
52,000
1
46,000
25,000
2
68,000
22,000
3
68,000
21,500
4
458,000
17,500
Whichever project you choose, if any, you require a return of 11
percent on your investment.
a-1. What is the payback period for each project?
(Do not round intermediate calculations and round your
answers to 2 decimal places, e.g., 32.16.)
a-2. If you apply the payback criterion, which...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0...
Consider the following two mutually exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
–$199,124
–$15,993
1
25,800
5,691
2
51,000
8,855
3
54,000
13,391
4
416,000
8,695
Whichever project you choose, if any, you require a 6 percent
return on your investment.
a. What is the payback period for Project
A?
b. What is the payback period for Project
B?
c. What is the discounted...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0...
Consider the following two mutually exclusive projects:
Year
Cash Flow
(A)
Cash Flow
(B)
0
–$
360,000
–$
45,000
1
35,000
23,000
2
55,000
21,000
3
55,000
18,500
4
430,000
13,600
Whichever project you choose, if any, you require a 14 percent
return on your investment.
a-1
What is the payback period for each project? (Do not
round intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.)
Payback period
Project A
years
Project...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0...
Consider the following two mutually exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
–$260,730
–$15,011
1
27,800
4,942
2
56,000
8,023
3
55,000
13,040
4
426,000
9,138
Whichever project you choose, if any, you require a 6 percent
return on your investment.
a. What is the payback period for Project
A?
b. What is the payback period for Project
B?
c. What is the discounted...
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0...
Consider the following two
mutually exclusive projects:
Year
Cash Flow
(A)
Cash Flow
(B)
0
–$251,835
–$15,247
1
25,100
4,828
2
55,000
8,358
3
50,000
13,472
4
385,000
8,102
Whichever project you choose, if
any, you require a 6 percent return on your investment.
a.What is the discounted payback period for Project A?
b.What
is the discounted payback period for Project B?
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0...
Consider the following two
mutually exclusive projects:
Year
Cash Flow
(A)
Cash Flow
(B)
0
–$251,835
–$15,247
1
25,100
4,828
2
55,000
8,358
3
50,000
13,472
4
385,000
8,102
Whichever project you choose, if
any, you require a 6 percent return on your investment.
a.What is the discounted payback period for Project A?
b.What
is the discounted payback period for Project B?
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