A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1 2 3 4 Project S Project L -$1,000 $898.99 $240 -$1,000 $5 $10 $0 $260 $420 $732.42 The company's WACC is 9.0%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places. %
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1 2 3 4 Project S Project L -$1,000 $898.99 $240 -$1,000 $5 $10 $0 $260 $420 $732.42 The company's WACC is 9.0%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places. %
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
Question
9.
Project S requires an initial outlay at t = 0 of $19,000, and its expected cash flows would be $4,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $28,000, and its expected cash flows would be $12,150 per year for 5 years. If both projects have a WACC of 13%, which project would you recommend?
Select the correct answer.
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