Question
In: Finance
A company is considering two mutually exclusive projects Adept and Boffo. Project Adept requires an initial...
A company is considering two mutually exclusive projects Adept and Boffo. Project Adept requires an initial investment of $100,000 and is expected to generate after-tax cash flows of $45,000 per year for three years. Project Boffo requires an initial investment of $150,000 and is expected to generate after-tax cash flows of $50,000 per year for four years. The appropriate discount rate is 10%. What is the crossover rate for projects Adept and Boffo?
4.06% 16.65% 12.59% 7.77%
Solutions
jeff jeffy answered 2 years agoRelated Solutions
1. There are two mutually exclusive projects. Project A requires a $600,000 initial investment and is...
1. There are two mutually exclusive projects. Project A requires
a $600,000 initial investment and is expected to provide $120,000
annual net cash inflows for 6 years. Project B requires a $740,000
initial investment and is expected to provide $200,000 annual net
cash inflows for 4 years.
Which project should you accept according to IRR method when
your cost of capital is 10%?
A. Project A
B. Project B
C. Both
D. Neither of these
2. Leveraged IRR:
A. estimates...
Projects A and B are mutually exclusive projects. Project A requires an initial investment today of...
Projects A and B are mutually exclusive projects. Project A
requires an initial investment today of $300 and generates expected
cash flows of $100 at the end of each of the next 5 years. Project
B requires an initial investment today of $130 and generates
expected cash flows of $55 at the end of each of the next 5 years.
a. If you plotted the NPV profiles, what would be the "crossover
rate" in the graph? (Note you are not...
We have two independent and mutually exclusive projects, A and B. Project A requires an initial...
We have two independent and mutually
exclusive projects, A and B. Project A requires an initial
investment of $1500, and will yield $800 of cash inflows for the
next three years. Project B requires an initial investment of
$5000, and will yield $1,500 of cash inflows for the next five
years. The required return on each project is 10%.
a. What are the net present values of
Project A and Project B?
b. What is the problem with using the...
We have two independent and mutually exclusive projects, A and B. Project A requires an initial...
We have two independent and mutually exclusive projects, A and
B. Project A requires an initial investment of $1000, and will
yield $500 of cash inflows for the next three years. Project B
requires an initial investment of $3,500, and will yield $1,000 of
cash inflows for the next five years. The required return on both
projects is 10%.
(13 marks total)
a. What are the net present values of Project A and Project B?
b. What is...
We have two independent and mutually exclusive projects, A and B. Project A requires an initial...
We have two independent and mutually
exclusive projects, A and B. Project A requires an initial
investment of $1500, and will yield $800 of cash inflows for the
next three years. Project B requires an initial investment of
$5000, and will yield $1,500 of cash inflows for the next five
years. The required return on each project is 10%.
(13 marks total)
a. What are the net
present values of Project A and Project B?
b. ...
A company is considering two mutually exclusive projects. Initial investment for Project A (IRR=32%) is 15,000...
A company is considering two mutually exclusive projects.
Initial investment for Project A (IRR=32%) is 15,000 and for B
(IRR=28%) 18,000. For both projects, life time of the projects is 5
years, required rate of return for both the projects is 10%. The
net cash flows before the tax and depreciation are as given in the
table below. For both projects tax of 40% on cash inflows is to be
charged.
Year
1
2
3
4
5
Project A
7000...
. Marian Ltd is considering two mutually exclusive projects with the following details: PROJECT A Initial...
. Marian Ltd is considering two mutually exclusive projects with
the following details: PROJECT A Initial Investment $450,000 Scrap
value in year 5 $20,000 Year 1 2 3 4 5 $000 $000 $000 $000 $000
Annual Cash Flows 200 150 100 100 100 PROJECT B Initial Investment
$100,000 Scrap value in year 5 $10,000 Year 1 2 3 4 5 $000 $000
$000 $000 $000 Annual Cash Flow 50 40 30 20 20 Assume that the
initial investments at the...
Your firm is considering two projects that are mutually exclusive. Each project will require an initial...
Your firm is considering two projects that are mutually
exclusive. Each project will require an initial outlay of $200,000.
The forecast yearly cash flows are shown below. Time Project A
Project B 0 -200,000 -200,000 1 -25,000 120,000 2 80,000 80,000 3
100,000 40,000 4 140,000 25,000
a) Calculate the payback period (undiscounted) of each project.
Include fractional periods (e.g., x.xx years) in your response, if
applicable. b) Calculate the IRR of each project. c) Calculate the
Modified IRR (MIRR)...
Marian Ltd is considering two mutually - exclusive projects with the following details: Project A Initial...
Marian Ltd is considering two mutually - exclusive projects with
the following details:
Project A Initial investment Le 450,000
Scrape value in year 5 Le 20,000 Year 1 2 3 4 5
( Le000) ( Le000 ) (Le000) (Le000) ( Le000)
Annual Cash flows 200 150 100 100 100
Project B:
Initial investment Le 100,000
Scrape value in year 5 Le10,000
Year 1 2 3 4 5
( Le000 ) ( Le000 ) ( Le000) ( Le000) ( Le000 )...
Marian Ltd is considering two mutually - exclusive projects with the following details: Project A Initial...
Marian Ltd is considering two mutually - exclusive projects with
the following details:
Project A
Initial investment Le 450,000
Scrape value in year 5 Le 20,000
Year 1 2 3 4 5
( Le000) ( Le000 ) (Le000) (Le000) ( Le000)
Annual Cash flows 200 150 100 100 100
Project B:
Initial investment Le 100,000
Scrape value in year 5 Le10,000
Year 1 2 3 4 5
( Le000 ) ( Le000 ) ( Le000) ( Le000) ( Le000 )...
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