Bhupatbhai Bruin, Inc., has identified the following two mutually exclusive projects:YearCash Flow (A)Cash Flow (B)0-$36,500-$36,500118,8206,400214,32012,900311,82019,40048,82023,400At what discount rate would the company be indifferent between these two projects?○ 19.73%20.34%19.32%20.95%○ 21.36%

Answered: Image /qna-images/answer/1396eaf5-946c-466a-9557-1f97c94d5eeb.jpg

Answered: Bruin, Inc., has identified the…

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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Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -24,063 -24,063 1 10,320 12,063 2 10,900 9,360 3 10,800 10,400 Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent (take 0%, 5%, 10%, 15%, 20%, 25%). Calculate the IRR of the projects. What is the relationship between NPV and IRR for your values? What is the crossover rate for these two projects and what it indicates for your values? Note - answer all the parts of the question.
Piercy, LLC, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$56,000 -$56000 1 32,000 19,400 2 26,000 23,400 3 19,000 28,000 4 13,200 25,400 Over what range of Discount rates would you choose Project A? Project B? (Please list percentages rounded to 2 decimal places. Hint: The answer is not the same as the IRR.) Project A ____________% Project B ____________% At what discount rate would you be indifferent between these two projects? ____________%
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Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -$ 15,900 -$ 15,900 6,710 7,290 23 7,290 7,730 3,630 4,810 a. What is the IRR of Project X? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the IRR of Project Y? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. c. What is the crossover rate for these two projects? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. IRR b. IRR % % c. Crossover rate %
A) What is the IRR for Project A and B? B) if required return is 8%, what is the NPV of project A and project B? C) at what discount rate would the company be indifferent between these 2 project?
Over what range of discount rates would the company choose Project A? Project B? At what discount rate would the company be indifferent between these two projects? Explain.
Consider the following two mutually exclusive projects: Second part of the Question Year Cash Flow(X) Cash Flow(Y) 0 –$ 19,900 –$ 19,900 1 8,825 10,050 2 9,050 7,775 3 8,775 8,675 d) At which range of discount rates would you choose Project X over Project Y? e) At which range of discount rates would you choose Project Y over Project X?
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -$ 15,900 -$ 15,900 1 6,710 7,290 2 7,290 7,730 3 4,810 3,630 a. What is the IRR of Project X? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decim b. What is the IRR of Project Y? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decim c. What is the crossover rate for these two projects? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decim a. IRR b. IRR % % c. Crossover rate %
1. Consider the following two mutually exclusive projects, X and Y, and their cash flows information, Project X Y (a) (b) Year 0 ($2,600) ($3,100) Year 1 $1,000 $ 900 Cash Flows Year 2 $1,300 $1,500 Year 3 $ 800 $1,100 Year 4 $ 400 $ 800 Assume that the appropriate discount rate is 14%, calculate the Payback Period, the Modified IRR (McKinsey's approach) AND the Profitability Index for Project Y. State clearly the key piece of information that you need in order to make the correct investment recommendation on the two projects according to the Payback Period method. Given that Project X's IRR is 15.16%, which project should be chosen according to the IRR method? Precisely explain how you should construct the incremental project and its cash flows numerically. Precisely explain your final selection between these two mutually exclusive projects according to the incremental project (IRR) analysis.
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 1 2 3 -$20,000 8,850 9,100 8,800 2 Instruction: Sketch the NPV profiles for X and Y over a range of discount rates from 0% to 25%. What is the crossover rate for these two projects (when both projects have the same NPV)? Show your steps. -$20,000 10,100 7,800 8,700 A▾ B I = 18 1
11. IRR rule (S5.3) Consider the following two mutually exclusive projects: Cash flows ($) Project A B Co -50 -50 C₁ +60 0 C₂ +60 0 0 +140 Page 142 a. Calculate the NPV of each project for discount rates of 0%, 10%, and 20%. Plot these on a graph with NPV on the vertical axis and discount rate on the horizontal axis. b. What is the approximate IRR for each project? c. In what circumstances should the company accept project A? d. Calculate the NPV of the incremental investment (B – A) for discount rates of 0%, 10%, and 20%. Plot these on your graph. Show that the circumstances in which you would accept A are also those in which the IRR on the incremental investment is less than the opportunity cost of capital.
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y)0-$19.100-$ 19,100 18,625 9,650 2 8,650 7,575 3 8,575 8,475 Calculate the IRR for each project. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) What is the crossover rate for these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.. 32.16.) What is the NPV of Projects X and Y at discount rates of 0 percent, 15 percent, and 25 percent?

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