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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![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.
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1248fc89-8d9f-41ec-9e80-c5ecd05f6565%2Fafcb2978-6a52-488f-8972-748b0c24a5c5%2Fmr4k1z_processed.png&w=3840&q=75)
Transcribed Image Text: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.
%
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