Question
In: Finance
Assume a new project requires an initial investment of $10 million dollars, with ensuing cash flows...
Assume a new project requires an initial investment of $10 million dollars, with ensuing cash flows of $2, $4 and $5 million in years 1, 2 and 3. Assuming the company's WACC is 10%, which of the following statements is true?
a. The firm should reject the project, as the IRR is lower than the WACC.
b. The firm should accept the project, as the IRR is higher than the WACC.
c. The firm should accept the project, as the NPV is positive.
d. The firm should accept the project, as the NPV is negative.
e. None of these statements are true.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Assume a new project requires an initial investment of $10 million dollars, with ensuing cash flows...
Assume a new project requires an initial investment of $10
million dollars, with ensuing cash flows of $2, $4 and $5 million
in years 1, 2 and 3. Assuming the company's WACC is 10%, which of
the following statements is true?
The firm should reject the project, as the IRR is lower than the
WACC.
The firm should accept the project, as the IRR is higher than
the WACC.
The firm should accept the project, as the NPV is positive....
Assume a new project requires an initial investment of $10 million dollars, with ensuing cash flows...
Assume a new project requires an initial investment of $10
million dollars, with ensuing cash flows of $2, $4 and $5 million
in years 1, 2 and 3. Assuming the company's WACC is 10%, which of
the following statements is true?
The firm should reject the project, as the IRR is lower than the
WACC.
The firm should accept the project, as the IRR is higher than
the WACC.
The firm should accept the project, as the NPV is positive....
Assume a new project requires an initial investment of $6 million dollars, with ensuing cash flows...
Assume a new project requires an initial investment of $6
million dollars, with ensuing cash flows of $1, $3 and $5 million
in years 1, 2 and 3. Assuming the company's WACC is 10%, which of
the following statements is true?
a.) The firm should accept the project, as the IRR is lower than
the WACC.
b.) The firm should reject the project, as the IRR is higher
than the WACC.
c.) The firm should accept the project, as the...
+Consider a Project that requires an initial investment of 2000 and generates cash flows of 200,...
+Consider a Project that requires an initial investment of 2000
and generates cash flows of 200, 600, 800 and 1200 in years 1
through 4. Use a discount rate of 10%
Compute the Payback period (in years) for the project
+Consider a Project that requires an initial investment of 2000
and generates cash flows of 200, 600, 800 and 1200 in years 1
through 4. Use a discount rate of 10%
Compute the discounted payback period (in years) for the...
A project requires an initial investment of $1.2 million. It expects to generate a perpetual cash...
A project requires an initial investment of $1.2 million. It
expects to generate a perpetual cash flow. The first year cash flow
is expected at $100,000. The cash flows are then expected to grow
at 1.25% forever. If the cost of capital for this project is 11%,
what is the project's NPV?
Group of answer choices
-$0.480 million
$0.265 million
$7,177 million
-$0.174 million
-$0.265 million
$0.174 million
A project requires an initial investment of $1.2 million. It expects to generate a perpetual cash...
A project requires an initial investment of $1.2 million. It
expects to generate a perpetual cash flow. The first year cash flow
is expected at $100,000. The cash flows are then expected to grow
at 1.25% forever. The appropriate cost of capital for this project
is 11%. What is the project's IRR and should it be accepted based
on the IRR rule?
Group of answer choices
IRR is 9.6%; project should not be accepted
IRR is 9.6%; project should be...
1).A project requires an initial investment of $973,000. The projects generates cash flows of $250,000 in...
1).A project requires an initial investment of $973,000. The
projects generates cash flows of $250,000 in year 1, $300,000 in
year 2, $300,000 in year 3, $400,000 in year 4 and $400,000 in year
5. If the required rate of return for the project is 12 percent,
the payback period is ____________ and the discounted payback
period is _______________.
A).3.7 years; 4.5 years B).2.8
years; 3.9 years C). 2.8 years; 4.2 years
D).3.3 years; 3.9 years E).3.3
years; 4.2 years...
Project E requires an initial investment of $100,000 and the produces annual cash flows of $42,000...
Project E requires an initial investment of $100,000 and the
produces annual cash flows of $42,000 per year for each of the next
3 years. Project L also requires an initial investment of $100,000
and produces cash flows of $35000 in year 1, $45,000 in year 2, and
$75,000 in year 3. If the discount rate is 15% and the projects are
mutually exclusive.
a) Project L should be chosen
b) Neither project is chosen
c) Project E should be...
A project requires an investment of $330 million and has expected annual cash flows of $27...
A project requires an investment of $330 million and has
expected annual cash flows of $27 million in perpetuity, starting
in one year. In fact, future cash flows will be either $78 million
or $16 million, in perpetuity. The company can end the project in 1
year after collecting the first cash flow and thus finding out the
amount of future cash flows, and then sell all project assets for
$330 million (after taxes). The appropriate discount rate for the...
A project requires an investment of $110 million and has expected annual cash flows of $17...
A project requires an investment of $110 million and has
expected annual cash flows of $17 million in perpetuity, starting
in one year. The appropriate discount rate for the project is
14%.
The company can delay the project by 1 year. After 1 year, the
company can invest $110 million to start the project and will know
whether demand will be high or low. With high demand, future cash
flows will be $22 million in perpetuity, starting in year 2,...
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