Question
In: Finance
Your firm has estimated the following cash flows for two mutually exclusive capital investment projects. The...
Your firm has estimated the following cash flows for two mutually exclusive capital investment projects. The firm's required rate of return is 13%. Use this information for the next 3 questions.
Year Project A Cash Flow Project B Cash
Flow
0 -$100,000 -$100,000
1 28,900 48,000
2 28,900 40,000
3 28,900 40,000
4 28,900
5 28,900
Which of the following statements best describes projects A and B?
a) Project A should be accepted because it has the highest
NPV.
b) Project A should be accepted because it has the highest
EAA.
c) Project B should be accepted because it has the highest
EAA.
d) Both projects should be accepted because they have positive NPVs
and EAAs.
e) Neither project is acceptable.
Solutions
jeff jeffy answered 9 months agoRelated Solutions
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of...
Consider the following cash flows for two mutually exclusive
capital investment projects. The required rate of return is 16%.
Use this information for the next 3 questions. Year Project A Cash
Flow Project B Cash Flow 0 ($50,000) ($20,000) 1 15,000 6,000 2
15,000 6,000 3 15,000 6,000 4 13,500 5,400 5 13,500 5,400 6 6,750
5,400 Calculate the net present value of project A.
Answers:
a.342.28 b.1564.25 c.1245.11 d. 2709.21 e. 3802
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of...
Consider the following cash flows for two mutually exclusive
capital investment projects. The required rate of return is 15%.
Use this
Year Project A
Cash Flow Project B
Cash Flow
0 -$40,000 -$30,000
1 12,000 9,000
2 12,000 9,000
3 12,000 9,000
4 10,800
8,100
5 10,800 8,100
6 5,400
8,100
9. Which of the following statements is true concerning projects A
and B?
a) Both NPV and IRR lead to the same investment decision.
b) Due to time disparity, IRR indicates that project A should be
accepted and NPV indicates that project B...
A firm has two mutually exclusive investment projects to evaluate. The projects have the following cash...
A firm has two mutually exclusive investment projects to
evaluate. The projects have the following cash flows:
Time
Cash Flow X
Cash Flow Y
0
-$90,000
-$75,000
1
35,000
30,000
2
60,000
30,000
3
70,000
30,000
4
-
30,000
5
-
10,000
Projects X and Y are equally risky and may be repeated
indefinitely. If the firm’s WACC is 6%, what is the EAA of the
project that adds the most value to the firm? Do not round
intermediate calculations....
You've estimated the following cash flows (in $) for two mutually exclusive projects: Year Project A...
You've estimated the following cash flows (in $) for two
mutually exclusive projects:
Year
Project A
Project B
0
-5,200
-7,800
1
1,325
1,325
2
2,148
2,148
3
3,640
7,360
The required return for both projects is 8%.
1. What is the IRR for project A?
2. What is the IRR for project B?
3. Which project seems better according to the IRR method?
4. What is the NPV for project A?
5. What is the NPV for project B?...
You've estimated the following cash flows (in $) for two mutually exclusive projects: Year Project A...
You've estimated the
following cash flows (in $) for two mutually exclusive
projects:
Year
Project A
Project B
0
-5,700
-8,550
1
1,325
1,325
2
2,148
2,148
3
4,325
8,384
The required return
for both projects is 8%.
What is the IRR for
project A?
What is the IRR for
project B?
Which project seems
better according to the IRR method?
Project A
Project B
What is the NPV for project A?
What is the NPV for project B?
Which...
You've estimated the following cash flows (in $ million) for two mutually exclusive projects: Year Project...
You've estimated the
following cash flows (in $ million) for two mutually exclusive
projects:
Year
Project A
Project B
0
-29
-45
1
30
45
2
40
50
3
50
50
The appropriate
discount rate is 9%.
Part 1
What is the NPV of
project A (in $ million)?
Part 2
What is the NPV of
project B (in $ million)?
A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:...
A firm is considering two mutually exclusive projects, X and Y,
with the following cash flows: 0 1 2 3 4 Project X -$1,000 $110
$300 $400 $700 Project Y -$1,000 $900 $100 $55 $45 The projects are
equally risky, and their WACC is 10%. What is the MIRR of the
project that maximizes shareholder value? Round your answer to two
decimal places. Do not round your intermediate calculations.
A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:...
A firm is considering two mutually exclusive projects, X and Y,
with the following cash flows:
0
1
2
3
4
Project X
-$1,000
$100
$300
$400
$650
Project Y
-$1,000
$1,000
$110
$45
$55
The projects are equally risky, and their WACC is 10%. What is
the MIRR of the project that maximizes shareholder value? Do not
round intermediate calculations. Round your answer to two decimal
places.
%_____
A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:...
A firm is considering two mutually exclusive projects, X and Y,
with the following cash flows: 0 1 2 3 4 Project X -$1,000 $110
$280 $400 $700 Project Y -$1,000 $1,100 $110 $45 $50 The projects
are equally risky, and their WACC is 11%. What is the MIRR of the
project that maximizes shareholder value? Round your answer to two
decimal places. Do not round your intermediate calculations.
A firm is considering two mutually exclusive projects, X and Y, with the following cash flows:...
A firm is considering two mutually exclusive projects, X and Y,
with the following cash flows:
0
1
2
3
4
Project X
-$1,000
$110
$320
$400
$750
Project Y
-$1,000
$1,000
$90
$45
$50
The projects are equally risky, and their WACC is 11%. What is
the MIRR of the project that maximizes shareholder value? Do not
round intermediate calculations. Round your answer to two decimal
places
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