Question

In: Finance

Suppose that you have two mutually exclusive projects. A and B. Project A has cash flows...

Suppose that you have two mutually exclusive projects. A and B. Project A has cash flows of CF0, CF1, CF2, CF3, CF4, CF5. (Years 0-5). Project B has cash flow of CF0, CF1, CF2, CF3. The discount rate for the projects is 10.5%.

a) Analyze these two projects and recommend a project to accept.

b) Carefully outline all your analysis and reasoning and discuss your methodologies for arriving at your solution in detail.

Project A

Project B

CF0

(4,650.00)

(8,300.00)

CF1

830.00

5,500.00

CF2

1,355.00

5,500.00

CF3

1,750.00

5,500.00

CF4

2,825.00

CF5

3,250.00

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related 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   –$ 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...
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
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.
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            ...
Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Project A...
Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Project A Project B Year Cash Flow Cash Flow 0 -$10,000 -$8,000 1 4,000 7,000 2 2,000 3,000 3 6,000 1,000 4 8,000 3,000 At what cost of capital do the two projects have the same net present value? (That is, what is the crossover rate?) Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your...
Two projects being considered are mutually exclusive and have the following cash flows: Year Project A...
Two projects being considered are mutually exclusive and have the following cash flows: Year Project A Project B 0 -$50,000 -$50,000 1    15,000 0 2    15,000 0 3    15,000 0 4    15,000 0 5    15,000 90,000 1) Calculate NPV of each project if the required rate of return on these projects is 8 percent. 2) which would be chosen and why?
Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Project A...
Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Project A Project B Year Cash Flow Cash Flow 0 -$11,000 -$9,000 1 3,500 6,000 2 3,000 4,000 3 5,000 3,000 4 9,000 2,000 At what cost of capital do the two projects have the same net present value? (That is, what is the crossover rate?) Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your...
Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Project A...
Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Project A Project B Year Cash Flow Cash Flow 0 -$11,000 -$9,000 1 3,500 6,000 2 3,000 4,000 3 5,000 3,000 4 9,000 2,000 At what cost of capital do the two projects have the same net present value? (That is, what is the crossover rate?) Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your...
Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Project A...
Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Project A Project B Year Cash Flow Cash Flow 0 -$11,000 -$9,000 1 4,500 6,000 2 3,000 4,000 3 5,000 3,000 4 9,000 2,000 At what cost of capital do the two projects have the same net present value? (That is, what is the crossover rate?) Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT