A firm with a WACC of 10% is considering the following mutually exclusive projects: 0 1 2 3 4 5 Project 1 -$400 $60 $60 $60 $230 $230 Project 2 -$450 $350 $350 $115 $115 $115 Which project would you recommend? Select the correct answer. Oa. Both Projects 1 and 2, since both projects have IRR's > 0. Ob. Project 1, since the NPV1 > NPV2. Oc. Project 2, since the NPV2 > NPV1. Od. Neither Project 1 nor 2, since each project's NPV < 0. Oe. Both Projects 1 and 2, since both projects have NPV's > 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
Question

5. 

eBook Problem Walk-Through

Project L requires an initial outlay at t = 0 of $55,000, its expected cash inflows are $13,000 per year for 9 years, and its WACC is 7%. What is the project's discounted payback? Do not round intermediate calculations. Round your answer to two decimal places.

  years

A firm with a WACC of 10% is considering the following mutually exclusive projects:
0
1
2
3
4
5
Project 1
-$400
$60
$60
$60
$230
$230
Project 2
-$450
$350
$350
$115 $115
$115
Which project would you recommend?
Select the correct answer.
Oa. Both Projects 1 and 2, since both projects have IRR's > 0.
Ob. Project 1, since the NPV1 > NPV2.
Oc. Project 2, since the NPV2 > NPV1.
Od. Neither Project 1 nor 2, since each project's NPV < 0.
Oe. Both Projects 1 and 2, since both projects have NPV's > 0.
Transcribed Image Text:A firm with a WACC of 10% is considering the following mutually exclusive projects: 0 1 2 3 4 5 Project 1 -$400 $60 $60 $60 $230 $230 Project 2 -$450 $350 $350 $115 $115 $115 Which project would you recommend? Select the correct answer. Oa. Both Projects 1 and 2, since both projects have IRR's > 0. Ob. Project 1, since the NPV1 > NPV2. Oc. Project 2, since the NPV2 > NPV1. Od. Neither Project 1 nor 2, since each project's NPV < 0. Oe. Both Projects 1 and 2, since both projects have NPV's > 0.
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