11. 2 3 Project A - $1,275,000 $450,000 $475,000 $500,000 $500,000 Lamesa Lamp and Décor Shop wants to open a new location. The initial cost estimate and cash flows for the proposed expansion are given below. Should the new expansion project be accepted or rejected if the firm's cost of capital is 15.0 percent? No cash flows are projected after year 4. NPU= C+ 450 A. NPV (negative) - $48,527 IRR 17.2 percent B. NPV (negative) - $48,527 IRR 12.6 percent NPV (positive) $90,107 IRR 13.8 percent NPV (positive) $90,107 IRR 18.4 percent E. NPV (positive) $105,239 IRR 21.3 percent (1+r)^+ (1+.15)
11. 2 3 Project A - $1,275,000 $450,000 $475,000 $500,000 $500,000 Lamesa Lamp and Décor Shop wants to open a new location. The initial cost estimate and cash flows for the proposed expansion are given below. Should the new expansion project be accepted or rejected if the firm's cost of capital is 15.0 percent? No cash flows are projected after year 4. NPU= C+ 450 A. NPV (negative) - $48,527 IRR 17.2 percent B. NPV (negative) - $48,527 IRR 12.6 percent NPV (positive) $90,107 IRR 13.8 percent NPV (positive) $90,107 IRR 18.4 percent E. NPV (positive) $105,239 IRR 21.3 percent (1+r)^+ (1+.15)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:11.
2
3
Project A - $1,275,000
$450,000
$475,000
$500,000
$500,000
Lamesa Lamp and Décor Shop wants to open a new location. The initial cost estimate and cash flows for the proposed expansion
are given below. Should the new expansion project be accepted or rejected if the firm's cost of capital is 15.0 percent? No cash
flows are projected after year 4.
NPU= C+
450
A.
NPV (negative) - $48,527
IRR 17.2 percent
B.
NPV (negative) - $48,527
IRR 12.6 percent
NPV (positive)
$90,107
IRR 13.8 percent
NPV (positive)
$90,107
IRR 18.4 percent
E. NPV (positive)
$105,239
IRR 21.3 percent
(1+r)^+ (1+.15)
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