-2CAPITAL BUDGETING CRITERIA You must analyze two projects, X and Y. Eachproject costs $10,000, and the firm's WACC is 12%. The expected net cash flows areas follows:123+$6,500$3,500+$3,000$3,500Project X-$10,000$3,000$3,500$1,000$3,500Project Y -$10,000a. Calculate each project's NPV, IRR, MIRR, payback, and discounted payback.b. Which project(s) should be accepted if they are independent?Which project(s) should be accepted if they are mutually exclusive?d. How might a change in the WACC produce a conflict between the NPV and IRRrankings of the two projects? Would there be a conflict if WACC were 5%? (Hint: Plotthe NPV profiles. The crossover rate is 6.21875%.)e. Why does the conflict exist?C.

NPV is the sum of present value of cash flows in the project WACC= 12% Year Cash Flows - X…

Answered: -2 CAPITAL BUDGETING CRITERIA You must…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 9PROB

See similar textbooks

Similar questions

ST-2 CAPITAL BUDGETING CRITERIA You must analyze two projects, X and Y. Each project costs $10,000, and the firm's WACC is 12%. The expected net cash flows are as follows: 2 3 Project X -$10,000 Project Y -$10,000 $6,500 $3,500 $3,000 $3,500 $3,000 $3,500 $1,000 $3,500 a. Calculate each project's NPV, IRR, MIRR, payback, and discounted payback. b. Which project(s) should be accepted if they are independent? c. Which project(s) should be accepted if they are mutually exclusive? d. How might a change in the WACC produce a conflict between the NPV and IRR rankings of the two projects? Would there be a conflict if WACC were 5%? (Hint: Plot the NPV profiles. The crossover rate is 6.21875%.) e. Why does the conflict exist?
CAPITAL BUDGETING CRITERIA You must analyze two projects, X and Y. Each project costs $10,000, and the firm's WACC is 12%. The expected net cash flows are as follows: 1 2 4 Project X Project Y -$10,000 -$10,000 $6,500 $3,500 $3,000 $3,500 $3,000 $3,500 $1,000 $3,500 Calculate each projecť's NPV, IRR, MIRR, payback, and discounted payback. b. Which project(s) should be accepted if they are independent? c. Which project(s) should be accepted if they are mutually exclusive? a. с. How might a change in the WACC produce a conflict between the NPV and IRR rankings of the two projects? Would there be a conflict if WACC were 5%? (Hint: Plot the NPV profiles. The crossover rate is 6.21875%.) e. Why does the conflict exist?
Modified internal h. Payback period; discounted payback CAPITAL BUDGETING CRITERIA You must analyze two projects, X and Y. Each project costs $10,000, and the firm's WACC is 12%. The expected cash flows are as follows. ST-2 0. 1 2. 4 -$10,000 -$10,000 $3,000 $3,500 $1,000 $3,500 $3,000 Project X Project Y $6,500 $3,500 $3,500 Calculate each project's NPV, IRR, MIRR, payback, and discounted payback. b. Which project(s) should be accepted if they are independent? Which project(s) should be accepted if they are mutually exclusive? d. How might a change in the WACC produce a conflict between the NPV amd IRR rankings of the two projects? Would there be a conflict if WACC were 5%? (Hint: Plot the NPV profiles. The crossover rate is 6.21875%.) a. C. e. Why does the conflict exist?
Capital Budgeting Techniques Analyze the two independent projects, X and Y. Each project costs $10,000, and the firm’s required rate of return is 12%. The expected net cash flows are as follows: Outflows Inflows Projects Year 1 2 3 4 X -10,000 6,500 3,000 3,000 1,000 Y -10,000 3,500 3,500 3,500 5,500 Required: Calculate for each project: Payback Period IRR NPV PI Give your decision regarding acceptation and rejection of the project. Explain which criteria you based your decision upon and why?
The Basics of Capital Budgeting Your division is considering two projects with the following cash flows (in millions): 0 1 2 3 Project A -$31 $7 $12 $22 Project B -$19 $13 $6 $5 What are the projects' NPVs assuming the WACC is 5%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A: $___ million Project B: $___ million What are the projects' NPVs assuming the WACC is 10%? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to two decimal places. Project A: $___ million Project B: $___ million What are the projects' NPVs assuming the…
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Sketch the NPV profile for projects A & B.
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the IRR and MIRR of projects A & B. Assume a reinvestment rate of 13% for the calculation of MIRR.
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Calculate the payback period and discounted payback period for projects A & B.
Capital Budgeting Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 12% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$300,000 -$405,000 1 -387,000 134,000 2 -193,000 134,000 3 -100,000 134,000 4 600,000 134,000 5 600,000 134,000 6 850,000 134,000 7 -180,000 0 Under what conditions on the cost of capital should project B be preferred to project A?
Suppose a company has the following three project and limits it capital budget to $50,000. Project Present Value of Cash Initial Investment A. $40,000. $25,000B. 37,500. 25,000C. 70,000. 50,0001. Calculate the projects' NPVs.2. Calculate the projects' PIs.3. Which project (s) should the company choose? Why?
Suppose a company has the following three projects and limits it capital budget to $50,000. Projects Present Value of Cash Inflows Initial Investment A $40,000 $25,000 B 37,500 25,000 70,000 50,000 1. Calculate the projects' NPVSS. 2. Calculate the projects' Pls. 3. Which project(s) should the company choose? Why?
Suppose a company has the following three projects and limits it capital budget to $50,000. Projects Present Value of Cash Inflows Initial Investment A $40,000 $25,000 B 37,500 25,000 C 70,000 50,000 Calculate the projects’ NPVs. Calculate the projects’ PIs. Which project(s) should the company choose? Why?

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Fundamentals Of Financial Management, Concise Edi…

Finance

ISBN:

9781337902571

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Fundamentals of Financial Management, Concise Edi…

Finance

ISBN:

9781305635937

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Fundamentals Of Financial Management, Concise Edi…

Finance

ISBN:

9781337902571

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Fundamentals of Financial Management, Concise Edi…

Finance

ISBN:

9781305635937

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS