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Bruin, Incorporated, has identified the following two mutually exclusive projects: Year 0 1 2 1234 3 Cash Flow (A) -$ 59,000 35,000 29,000 20,500 13,800 Cash Flow (B) -$ 59,000 22,100 26,100 31,000 25,100

Bruin, Incorporated, has identified the following two mutually exclusive projects: Year 0 1 2 1234 3 Cash Flow (A) -$ 59,000 35,000 29,000 20,500 13,800 Cash Flow (B) -$ 59,000 22,100 26,100 31,000 25,100

Essentials Of Investments
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
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Bruin, Incorporated, has identified the following two mutually exclusive projects

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Bruin, Incorporated, has identified the following two mutually exclusive projects: Year 0 AWN TO 1 2 3 4 Cash Flow (A) -$ 59,000 35,000 29,000 20,500 13,800 Cash Flow (B) -$ 59,000 22,100 26,100 31,000 25,100 a-1. What is the IRR for each of these projects? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a-2. If you apply the IRR decision rule, which project should the company accept? b-1. Assume the required return is 15 percent. What is the NPV for each of these projects? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. Which project will you choose of you apply the NPV decision rule? c-1. Over what range of discount rates would you choose Project A? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. c-2. Over what range of discount rates would you choose Project B? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. d. At what discount rate would you be indifferent between 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.
Transcribed Image Text:Bruin, Incorporated, has identified the following two mutually exclusive projects: Year 0 AWN TO 1 2 3 4 Cash Flow (A) -$ 59,000 35,000 29,000 20,500 13,800 Cash Flow (B) -$ 59,000 22,100 26,100 31,000 25,100 a-1. What is the IRR for each of these projects? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. a-2. If you apply the IRR decision rule, which project should the company accept? b-1. Assume the required return is 15 percent. What is the NPV for each of these projects? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. Which project will you choose of you apply the NPV decision rule? c-1. Over what range of discount rates would you choose Project A? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. c-2. Over what range of discount rates would you choose Project B? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. d. At what discount rate would you be indifferent between 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-1. Project A Project B a-2. b-1. b-2. C-1. c-2. d. Project A Project B Discount rate % % % % %
Transcribed Image Text:a-1. Project A Project B a-2. b-1. b-2. C-1. c-2. d. Project A Project B Discount rate % % % % %
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