Question
In: Finance
Inc. are considering two projects with the cash flows presented in the following table. The required...
Inc. are considering two projects with the cash flows presented in the following table. The required return for both projects is 15 percent. (a) If the two projects are independent, should you accept both projects or accept only one of them? Use both NPV and IRR method to explain your choice. (b) If the two projects are mutually exclusive, which method should you use and which project should you accept? Why?
| Year | Project A | Project B |
| 0 | -600,100 | -100,050 |
| 1 | 307,100 | 77,050 |
| 2 | 390,100 | 76,050 |
| 3 | 180,100 | 80,050 |
Solutions
jeff jeffy answered 1 year agoRelated Solutions
You are considering two independent projects with the following cash flows. The required return for both...
You are considering two independent projects with the following
cash flows. The required return for both projects is 10%. Given
this information, which one of the following is correct?
Year Project A Project B
0 -$950,000 -$125,000
1 $330,000 $ 55,000
2 $400,000 $ 50,000
3 $450,000 $ 50,000
A. You should accept project B since it has the higher IRR and
reject project A because you cannot accept both projects.
B. You should accept project A because it has...
North Shore Inc. is considering two projects with the following probability of outcome and cash flows....
North Shore Inc. is considering two projects with the
following probability of outcome and cash flows.
State of
economy Probability of
outcome
Cash flows ($)
A
B
Strong
0.2
700
550
Normal
0.5
400
400
Weak
0.3
200
300
Compute the expected net present value, standard
deviation, and coefficient of variation of each of the project.
choosing between two projects. The cash flows for the projects are given in the following table...
choosing between two projects. The cash flows for the projects
are given in the following table ($ million):
Project Year 0 Year 1 Year 2 Year 3 Year 4
A negative $ 48
−$48 $ 24
$24 $ 21
$21 $ 19
$19 $ 15
$15
B negative $ 102
−$102 $ 20
$20 $ 41
$41 $ 48
$48 $ 58
$58
a. What are the IRRs of the two projects?
b. If your discount rate is
4.7 %...
Interstate Appliance Inc. is considering the following two mutually exclusive projects. Projected cash flows for these...
Interstate Appliance Inc. is considering the following two
mutually exclusive projects. Projected cash flows for these
ventures are as follows:
Plan A
IO
CF1
CF2
CF3
CF4
CF5
3,600,000
0
0
0
0
7,000,000
Plan
B
IO
CF1
CF2
CF3
CF4
CF5
3,500,000
1,000,000
0
2,000,000
2,000,000
1,000,000
If Interstate
Appliance has a 12% cost of capital, what decision should be made
regarding the projects above?
a. Accept plan A.
b. Accept plan B.
c. Reject both plans A and...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as...
Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown as follows. The
required rate of return on projects of both of their risk class is
10 percent, and the maximum allowable payback and discounted
payback statistic for the projects are two and a half and three and
a half years, respectively. Calculate the payback and use the
payback decision rule to evaluate these projects; which one(s)
should be accepted or rejected and why? Trying...
Jamison is considering two mutually exclusive projects with the following cash flows and the cost of...
Jamison is considering two mutually exclusive projects with the
following cash flows and the cost of capital of 10%.
Year XX YY
0 -$1,000 -$1,200
1 $800 $700
2 $800 $700
3 $700
a) Based on Annualized NPV, which project would you choose? Why
ANPV is better than NPV in this case.?
9. Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown...
9. Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 8
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years,
respectively.
Time:
0
1
2
3
Project A Cash Flow
-25,000
15,000
35,000
6,000
Project B Cash Flow
-35,000
15,000
25,000
55,000
Use the NPV decision rule to evaluate...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 8
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years, respectively.
Time: 0 1 2 3 Project A Cash Flow -25,000 15,000 35,000 6,000
Project B Cash Flow -35,000 15,000 25,000 55,000 Use the discounted
payback decision rule to evaluate...
1. Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown...
1.
Suppose your firm is considering two mutually exclusive, required
projects with the cash flows shown as follows. The required rate of
return on projects of both of their risk class is 8 percent, and
the maximum allowable payback and discounted payback statistic for
the projects are two and three years, respectively.
Time
0
1
2
3
Project A Cash Flow
?20,000
10,000
30,000
1,000
Project B Cash Flow
?30,000
10,000
20,000
50,000
Use the discounted payback decision rule to...
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive,
required projects with the cash flows shown below. The required
rate of return on projects of both of their risk class is 11
percent, and that the maximum allowable payback and discounted
payback statistic for the projects are 2 and 3 years,
respectively.
Time:
0
1
2
3
Project A Cash
Flow
-38,000
28,000
48,000
19,000
Project B Cash
Flow
-48,000
28,000
38,000
68,000
Use the discounted payback decision rule to evaluate...
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