Question

In: Finance

Question 1-- NPV Profiles: Graph the NPV profiles for both projects on a common chart., making...

Question 1-- NPV Profiles: Graph the NPV profiles for both projects on a common chart., making sure you identify the "crucial" points.

Time Project A Cash flow Project B Cash flow

0 -$725 -$850

1 100 200

2 250 200

3 250 200

4 200 200

5 100 200

6 100 200

7 100 200

Note: First column is time, second column is Project A, third column is Project B.

This is a two-part question. Answer for first ? is needed to solve ? 2.

Question 2--  IRR Applicability:For what range of possible interest rates would you want to use IRR to choose between the those to projects? For what range would you NOT want to use IRR?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Question 1-- NPV Profiles: Graph the NPV profiles for both projects on a common chart., making...
Question 1-- NPV Profiles: Graph the NPV profiles for both projects on a common chart., making sure you identify the "crucial" points. 0 -$725 -$850 1 100 200 2 250 200 3 250 200 4 200 200 5 100 200 6 100 200 7 100 200 Note: First column is time, second column is Project A cash flow , third column is Project B flow. This is a two-part question. Answer for first ? is needed to solve ? 2....
Explain why NPV profiles of different projects can cross over? What kind of projects tend to...
Explain why NPV profiles of different projects can cross over? What kind of projects tend to have steeper and flatter NPV profile? What is the implication of the slope of NPV profile?
Cooper Electronics uses NPV profiles to visually evaluate competing projects. Key data for the two projects...
Cooper Electronics uses NPV profiles to visually evaluate competing projects. Key data for the two projects under consideration are given in the following​ table: Using these​ data, graph, on the same set of​ axes, the NPV profiles for each project using discount rates of 0​%, 8​%, and the IRR. Initial investment   $30,000   $25,000 Year   Operating cash inflows   1   $7,000   $6,000 2   $10,000   $9,000 3   $12,000   $9,000 4   $10,000   $8,000
11-2: Net Present Value (NPV) 11-7: NPV Profiles NPV Your division is considering two projects with...
11-2: Net Present Value (NPV) 11-7: NPV Profiles NPV Your division is considering two projects with the following cash flows (in millions): 0 1 2 3 Project A -$27 $13 $17 $8 Project B -$25 $14 $11 $2 What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Project A    $   million Project B    $   million What are the projects' NPVs...
You have two mutually exclusive projects A and B and have constructed the NPV profiles for...
You have two mutually exclusive projects A and B and have constructed the NPV profiles for these projects. You find that the IRR of A is greater than the IRR of B but at an 8% cost of capital using the NPV method you would prefer project B. What is causing the NPV profile pattern that you are observing? Which project do you prefer and why? Essentially you are preferring one method over another so you need to discuss the...
These are the cash flows for two projects. Calculate the NPV and IRR for both. Then...
These are the cash flows for two projects. Calculate the NPV and IRR for both. Then select the best project according to the NPV measure. Use a WACC of 10% for both projects. The investments are 7 for project 1, and 8 for project 2. Cash flows for project 1 year 1 2 3 4 cash 4 6 2 4 Cash flows for project 2 year 1 2 3 4 cash 3 2 7 4 Calculate the NPV for project...
Assignment 5 10-15 Cooper Electronics uses NPV profiles to visually evaluate competing projects. Key data for...
Assignment 5 10-15 Cooper Electronics uses NPV profiles to visually evaluate competing projects. Key data for the two projects under consideration are given in the following? table: Terra Firma Initial investment   $33,000   $30,000 Year Operating cash inflows   1 $12,000   $10,000 2 $12,000   $8,000 3 $11,000   $12,000 4 $9,000   $9,000 Using these? data, graph, on the same set of? axes, the NPV profiles for each project using discount rates of 0?%, 8?%, and the IRR.
NPV PROFILES: TIMING DIFFERENCES An oil-drilling company must choose between two mutually exclusive extraction projects, and...
NPV PROFILES: TIMING DIFFERENCES An oil-drilling company must choose between two mutually exclusive extraction projects, and each costs $12 million. Under Plan A, all the oil would be extracted in 1 year, producing a cash flow at t = 1 of $14.4 million. Under Plan B, cash flows would be $2.1323 million per year for 20 years. The firm's WACC is 11.4%. Construct NPV profiles for Plans A and B. Round your answers to two decimal places. Do not round...
NPV PROFILES: TIMING DIFFERENCES An oil-drilling company must choose between two mutually exclusive extraction projects, and...
NPV PROFILES: TIMING DIFFERENCES An oil-drilling company must choose between two mutually exclusive extraction projects, and each costs $11.8 million. Under Plan A, all the oil would be extracted in 1 year, producing a cash flow at t = 1 of $14.16 million. Under Plan B, cash flows would be $2.0967 million per year for 20 years. The firm's WACC is 12%. Construct NPV profiles for Plans A and B. Round your answers to two decimal places. Do not round...
1. Calculate the net present value (NPV) for both projects, anddetermine which project should be...
Use the following information to answer the next three questions. Consider the cash flows from two mutually exclusive projects: YearProject AProject B0-$420,000-$420,0001$140,000$400,0002$230,000$110,0003$331,000$140,000The appropriate discount rate is 8.5%.1. Calculate the net present value (NPV) for both projects, and determine which project should be accepted based on NPV. Round both NPVs to the nearest dollar.2. Calculate the internal rate of return (IRR) for both projects, and determine which project should be accepted based on IRR.3. Calculate the net present value (NPV) for both projects...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT