Question
In: Finance
Using everything you know about capital budgeting, if the two projects are mutually exclusive, which project...
Using everything you know about capital budgeting, if the two projects are mutually exclusive, which project or projects should the firm undertake? Explain in full. The answer must be complete (mini paragraph). Substantiate with numbers.
Solutions
Expert Solution
MUTUALLY EXCLUSIVE PROJECTS MEANS ONLY ONE OF THE PROJECT IS TO BE SELECTED.
SO IT IMPLIES CAPITAL RATIONING.
SO WE HAVE TO SELECT THE BEST PROJECT & NPV IS THE BEST METHOD FOR SELECTING THE PROJECT.
WHY NPV ?
BECAUSE THIS IS THE ONLY PROJECT WHICH USES TIME VALUE CONCEPT. SO OUT OF ALL METHODS AVAILABLE, NPV IS THE ONLY BEST.
EXAMPLE : SEE EXCEL SHEET
jeff jeffy answered 1 year agoRelated Solutions
As the director of capital budgeting for Bissett Corporation, you are evaluating two mutually exclusive projects...
As the director of capital budgeting for Bissett Corporation,
you are evaluating two mutually exclusive projects (you can only
choose one) with the following cash flows. The discount rate is
15%.
Year
Project X
Project Y
0
- 100,000
- 100,000
1
50,000
10,000
2
40,000
30,000
3
10,000
40,000
4
10,000
30,000
Which project would you choose?
Project X since it has higher IRR
Project Y since it has higher NPV
Project X since it has higher NPV
Neither...
As the director of capital budgeting for EFG Corporation, you are evaluating two mutually exclusive projects...
As the director of capital budgeting for EFG Corporation, you
are evaluating two mutually exclusive projects with the following
net cash flows:
Project E Project F
Year Cash Flow Cash Flow
0 -$100,000 -$100,000
1 50,000 10,000
2 40,000 30,000
3 30,000 40,000
4 10,000 60,000
If EFG’s cost of capital is 15 percent, What is the NPV and
IRR of the better project, respectively??
As the director of capital budgeting for EFG Corporation, you are evaluating two mutually exclusive projects...
As the director of capital budgeting for EFG Corporation, you
are evaluating two mutually exclusive projects with the following
net cash flows:
Project E Project F
Year Cash
Flow Cash Flow
0 -$100,000
-$100,000
1
50,000
10,000
2
40,000
30,000
3
30,000
40,000
4
10,000
60,000
If EFG’s cost of capital is 15 percent, What is the NPV and IRR
of the better project, respectively??
As the director of capital budgeting for EFG Corporation, you are evaluating two mutually exclusive projects...
As the director of capital budgeting for EFG Corporation, you
are evaluating two mutually exclusive projects with the following
net cash flows:
Project E Project F
Year Cash
Flow Cash Flow
0 -$100,000
-$100,000
1
50,000
10,000
2
40,000
30,000
3
30,000
40,000
4
10,000
60,000
If EFG’s cost of capital is 15 percent, What is the NPV and IRR
of the better project, respectively??
Company A is considering the following two mutually exclusive projects. Company A bases their capital budgeting...
Company A is considering the following two mutually exclusive
projects. Company A bases their capital budgeting decisions solely
on the NPV criteria. (Do not round intermediate calculations. Round
your final answer to two decimal places.)
Year
Project 1
Project 2
0
-$75,000
-$75,000
1
$50,000
$20,000
2
$30,000
$21,000
3
$15,000
$59,000
1. At what required rate of return (%) is Company A indifferent
between the two projects?
2. If the required rate of return is less than the crossover...
Capital Budgeting Question: You are considering two mutually exclusive projects for potential investment. The cash flows...
Capital Budgeting Question:
You are considering two mutually exclusive projects for
potential investment. The cash flows for the two projects are
given. For both projects, the required rate of return is 12%.
Year
Project A
Project B
0
($40,000)
($40,000)
1
$14,400
$0
2
$14,400
$0
3
$14,400
$0
4
$14,400
$70,000
Find the following:
1. The Net Present Value (NPV) .
2. The Internal Rate of Return (IRR) .
3. Use Excel to draw a graph of the NPV...
The director of capital budgeting for Giant Inc. has identified two mutually exclusive projects, L and...
The director of capital budgeting for Giant Inc. has identified
two mutually exclusive projects, L and S, with the following
expected net cash flows: Expected Net Cash Flows Year Project L
Project S 0 ($100) ($100) 1 10 70 2 60 50 3 80 20 Both projects
have a cost of capital of 12 percent. What is Project S's MIRR?
What is Project L's MIRR?
Capital budgeting criteria: mutually exclusive projects A firm with a WACC of 10% is considering the...
Capital budgeting criteria: mutually exclusive projects
A firm with a WACC of 10% is considering the following mutually
exclusive projects:
0
1
2
3
4
5
Project A
-$250
$50
$50
$50
$200
$200
Project B
-$600
$300
$300
$70
$70
$70
Which project would you recommend?
Select the correct answer.
I. Both Projects A and B, since both projects have IRR's >
0.
II. Project A, since the NPVA >
NPVB.
III. Both Projects A and B, since both...
Capital budgeting criteria: mutually exclusive projects A firm with a WACC of 10% is considering the...
Capital budgeting criteria: mutually exclusive projects
A firm with a WACC of 10% is considering the following mutually
exclusive projects:
Project A
-$300
$75
$75
$75
$220
$220
Project B
-$550
$250
$250
$80
$80
$80
Which project would you recommend?
Select the correct answer.
I. Both Projects A and B, since both projects have IRR's >
0.
II. Project A, since the NPVA >
NPVB.
III. Project B, since the NPVB >
NPVA.
IV. Neither A or B, since...
A company is evaluating two mutually exclusive projects in which to invest. Project A needs an...
A company is evaluating two mutually exclusive projects in which
to invest. Project A needs an investment of $300,000 and will
deliver $160,000 in annual profits during its 8 years life. Project
B needs an investment of $400,000 and will deliver $210,000 in
annual profits during its 6 years life. Considering a Study Period
of 6 years, and that project A can be sold for $200,000 at the end
of the 6th year (because it will still have 2 years...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Description Write a program that prints out your name, the course ID of this class, what...
- A project has an initial cost of $65,475, expected net cash inflows of $12,000 per year...
- Make a program that lets the user enter a positive or negative integer as many times...
- using java, parse a text file to be able to list the word(s) with the highest...
- Consider the following linear programming problem: Maximize 10X + 8Y Subject to: 40X + 24Y <=...
- Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies...
- Think about a company you have worked for, either currently or in the past. Reflect upon...
ADVERTISEMENT