еВookProblem Walk-ThroughA company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:123457Project A-$300-$387-$193-$100$600$600$850-$180Project B-$400$133$133$133$133$133$133$0 e. Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent.Discount RateNPV Project ANPV Project B0%$42$10121518.124.18

Given, Project A and Project B with the cash flows. The WACC is 12%.

A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 4 7 + Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$400 $133 $133 $133 $133 $133 $133 $0

A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 4 7 + Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180 Project B -$400 $133 $133 $133 $133 $133 $133 $0

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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еВook
Problem Walk-Through
A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
1
2
3
4
5
7
Project A
-$300
-$387
-$193
-$100
$600
$600
$850
-$180
Project B
-$400
$133
$133
$133
$133
$133
$133
$0

e. Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent.
Discount Rate
NPV Project A
NPV Project B
0%
$4
2$
10
12
15
18.1
24.18

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9. Consider the following two mutually exclusive projects: Project A Project B -$15,000 -$25,000 $5,000 $12,000 $8,000 n 10 $0 $X $X 3 PW (15%) ? $9,600 The firm's MARR is known to be 15%. Compute the PW (15%) for Project A. 10. In question 9, compute the unknown cash flow X in years 2 and 3 for Project B. 11. In question 9, which project would you select?
Please show working
11-12 IRR and NPV A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 1 3 4 Project S -$1,000 Project L -$1,000 $900 $0 $250 $10 $400 $10 $800 $250 The company's WACC is 10 percent. What is the IRR of the better project? (Hint: Note that the better project may or may not be the one with the higher IRR.)
c) Consider this question: XYZ Company can borrow money at an interest rate of 10% (that's their Cost of Capital). They have an opportunity to invest in a project that will generate returns (Free Cash Flows) over the next three years. One year from now, the project will generate $80,000 in FCF, two years from now the project will generate $90,000 in FCF, and three years from now the project will generate $100,000 in FCF. The project will require an investment of $230,000. Is it worth doing? Time 1 year from now 2 years from now 3 years from now Free Cash Flow $ $ Cost of Capital 10% 80,000 90,000 100,000
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Calculate IRR of projects S and L, IRRS & IRRL IRRS IRRL UF Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and are not repeatable. WACC: 7.75% Year 0 1 2 3 4 CFS ($1,050) $700 $625 CFL ($1,050) $370 $370 $360 $360
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