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 Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 10P: Hemmingway, Inc. is considering a $5 million research and development (R&D) project. Profit...

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