A company is analyzing two mutually exclusive projects, S and L, with the following cash flows:01423$893.96 $250$0$240Project S-$1,000$5$15Project L-$1,000$380$862.46The company's WACC is 10.0%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round youranswer to two decimal places.%

IRR is also known as Internal rate of Return. It is a capital budgeting technique which helps in…

Answered: A company is analyzing two mutually…

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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Can you answer part b of this question
Pet World is considering a project that has the following cash flow data. Year Cash flows 0 -$9,500 1 2 3 4 $2,000 $2,025 $2,050 $2,075 $2,100 If the required rate of the return on similar projects is 3%, the firm should IRR is 5 this project because its accept; 2.31% reject; 2.57% reject; 2.82% reject; 2.08% accept; 3.10%
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: Project S Project L 0 % 1 2 3 4 H $10 $788.16 -$1,000 $884.88 $260 $5 -$1,000 $0 $260 $380 The company's WACC is 8.5%. 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.
Barry Inc. is considering a project that has the following cash flow and WACC data. What is the project's MIRR?WACC = 12.85% Year 0 1 2 3 4 5 CFs -$35,600 10,100 20,200 30,300 40,400 50,500 `
XYZ Corp. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the WACC or negative, in both cases it will be rejected. Year 0 1 2 3 Cash flows -$1,000 $325 $425 $525
Robinson Robotics is considering two mutually exclusive projects, Project A and Project B. The projects have the following cash flows: Year Project A Cash Flow Project B Cash Flow 0 -$200 -$300 1 20 90 2 30 70 3 40 60 4 50 50 5 60 40 At what cost of capital would the two projects have the same net present value (NPV)? 12.69% 9.32% 10.32% 8.14% None of the above
Your division is considering two projects with the following cash flows (in millions): Year 1 3 $5 $17 $10 $6 5% Project A -$25 Project B -$20 a. What are the projects' NPVs assuming that the WACC is 5%, 10%, and 15%? WACC NPV-A NPV-B WACC 10% 0 15% 2 NPV-A $10 $9 NPV-B b. What are the projects' IRRs? c. If the WACC was 10%, ad A and B were mutually exclusive projects, which project would you choose?
6.
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 1 2 4 Project S -$1,000 $871.53 $260 $10 $10 Project L -$1,000 $0 $260 $400 $766.36 The company's WACC is 10.5%. 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. 11.90 %

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