3. Boca Raton Stake House is now considering expanding the business. Bob Correll, the owner and CEO, of the company is facing a difficulty which projects he should invest. The projects are: Project CFO Frozen Yogurt CF1 CF2 CF3 CF4 CF5 WACC ($1,000) $180 $200 $220 $230 $250 8.50% Jewelry ($5,500) $1,200 $1,400 $1,600 $1,800 $2,000 12.50% Soft ($3,000) $1,000 $900 $700 Drink $600 $500 Farming ($7,800) $4,000 $3,200 $2,400 $1,600 $800 10% 15% Note: All the number is in thousand (,000) Before deciding, he wanted to know the return in both dollar value and percentage. a. Calculate NPV for these projects. b. Calculate IRR for these projects. c. Why WACC for each project is different? Explain. d. If these projects are independent projects, which project should he invest? e. If these projects are mutually exclusive projects, which project should he invest?
3. Boca Raton Stake House is now considering expanding the business. Bob Correll, the owner and CEO, of the company is facing a difficulty which projects he should invest. The projects are: Project CFO Frozen Yogurt CF1 CF2 CF3 CF4 CF5 WACC ($1,000) $180 $200 $220 $230 $250 8.50% Jewelry ($5,500) $1,200 $1,400 $1,600 $1,800 $2,000 12.50% Soft ($3,000) $1,000 $900 $700 Drink $600 $500 Farming ($7,800) $4,000 $3,200 $2,400 $1,600 $800 10% 15% Note: All the number is in thousand (,000) Before deciding, he wanted to know the return in both dollar value and percentage. a. Calculate NPV for these projects. b. Calculate IRR for these projects. c. Why WACC for each project is different? Explain. d. If these projects are independent projects, which project should he invest? e. If these projects are mutually exclusive projects, which project should he invest?
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:3. Boca Raton Stake House is now considering expanding the business. Bob Correll, the
owner and CEO, of the company is facing a difficulty which projects he should
invest. The projects are:
Project CFO
Frozen
Yogurt
CF1
CF2
CF3
CF4
CF5
WACC
($1,000) $180 $200 $220 $230 $250
8.50%
Jewelry ($5,500) $1,200 $1,400 $1,600 $1,800 $2,000 12.50%
Soft
($3,000) $1,000 $900 $700
Drink
$600 $500
Farming ($7,800) $4,000 $3,200 $2,400 $1,600 $800
10%
15%
Note: All the number is in thousand (,000)
Before deciding, he wanted to know the return in both dollar value and percentage.
a. Calculate NPV for these projects.
b. Calculate IRR for these projects.
c. Why WACC for each project is different? Explain.
d. If these projects are independent projects, which project should he invest?
e. If these projects are mutually exclusive projects, which project should he invest?
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