Question
In: Finance
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value.
|
Year |
Project(A) |
Project (B) |
|
0 |
-$30,000 |
-$30,000 |
|
1 |
13,000 |
5,000 |
|
2 |
11,000 |
5,000 |
|
3 |
9,000 |
5,000 |
|
4 |
7,000 |
5,000 |
|
5 |
0 |
5,000 |
|
6 7 8 9 10 |
0 0 0 0 0 |
5,000 5,000 5,000 5,000 5,000 |
The required rate of return is 10%.
(7). (4 points) Define and find the crossover rate.
(8). (7 points) Sketch the NPV profile. Plot all the relevant coordinates (i.e., the points on the x and y axis; and the cross-over rate) on the graph.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%.
(1). (4...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%
a....
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%.
(4). What...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%.
(4). What...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%
Q1:(4 points)...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...
You are considering the following two mutually exclusive
projects. Both projects will be depreciated using straight-line
depreciation to a zero book value over the life of the project.
Neither project has any salvage value.
Project A Project
B
Year Cash Flow Year Cash Flow
0 -$45,000 0 $-40,000
1 $17,500 1 $8,200
2 $18,000 2 $ 14,600
3 $22,500 3 $ 36,800
Required Rate of Return
Project A- 8% Project B- 12%
Required Payback Period
Project...
You are considering the following mutually exclusive projects. Both projects will be depreciated using straight line...
You are considering the following mutually exclusive projects.
Both projects will be depreciated using straight line depreciation
to a zero book value over the life of the project. Neither project
has any salvage value.
Year
Project A
Year
Project B
0
$ - 75,000
0
$-70,000
1
19,000
1
10,000
2
48,000
2
16,000
3
12,000
3
72,000
Required Rate of Return
10%
13%
Required Payback Period
2 years
2 years
Required Accounting Return
8%
11%
1. Based on the...
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project.
You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%.
(1)....
You are considering the following two mutually exclusiveprojects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project.
You are considering the following two mutually exclusiveprojects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value.
Year
Project(A)
Project (B)
0
-$30,000
-$30,000
1
13,000
5,000
2
11,000
5,000
3
9,000
5,000
4
7,000
5,000
5
0
5,000
6
7
8
9
10
0
0
0
0
0
5,000
5,000
5,000
5,000
5,000
The required rate of return is 10%.
(1)....
You are considering the following two mutually exclusive projects that will not be repeated. The required...
You are considering the following two mutually exclusive
projects that will not be repeated. The required rate of return is
11.25% for project A and 10.75% for project B. Which project should
you accept and why?
Year Project A Project B
0 -48,000 -126,900
1 18,400 69,700
2 31,300 80,900
3 11,700 0
project A; because its NPV is about $335 more than the NPV of
project B
project A; because it has the higher required rate of return
project...
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