5c c) Project A and Project B are two mutually exclusive projects with conventional cash flows. The internal rate ofreturn (IRR) for Project A is 17.22%. The internal rate of return (IRR) for project B is 23.92%. The net presentvalue (NPV) for each project are calculated at 5% p.a. effective and 10% p.a. effective cost of capital asshown below:Cost of capital5%10%A. Project A OnlyB. Project B OnlyC. Both ProjectsNPV ($)(Project A)D. Neither ProjectsE. Not Sure. More information is required.2,328.451,229.90Four companies are considering investing in the projects. The cost of capital for each company is listed below:Cost ofcapital4%CompanyCompany TortoiseCompany RabbitCompany OstrichCompany CheetahCompanyCompany TortoiseCompany RabbitCompany OstrichCompany CheetahPick one piece of advice from the list below for each company. Write the letter in the "Advice" column.NPV (S)(Project B)12%18%1,939.241,304.56Cost of capital Advice4%24%12%18%24%

NPV and IRR are two capital budgeting tools that help to decide on whether the capital project…

c) Project A and Project B are two mutually exclusive projects with conventional cash flows. The internal rate of return (IRR) for Project A is 17.22%. The internal rate of return (IRR) for project B is 23.92%. The net present value (NPV) for each project are calculated at 5% p.a. effective and 10% p.a. effective cost of capital as shown below: Cost of capital 5% 10% NPV (S) (Project A) NPV (S) (Project B) 2,328.45 1,939.24 1,229.90 1,304.56 Four companies are considering investing in the projects. The cost of capital for each company is listed below:

c) Project A and Project B are two mutually exclusive projects with conventional cash flows. The internal rate of return (IRR) for Project A is 17.22%. The internal rate of return (IRR) for project B is 23.92%. The net present value (NPV) for each project are calculated at 5% p.a. effective and 10% p.a. effective cost of capital as shown below: Cost of capital 5% 10% NPV (S) (Project A) NPV (S) (Project B) 2,328.45 1,939.24 1,229.90 1,304.56 Four companies are considering investing in the projects. The cost of capital for each company is listed below:

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

See similar textbooks

Similar questions

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Your division is considering two investment projects, each of which requires an up-front expenditure of 15 million. You estimate that the investments will produce the following net cash flows: a. What are the two projects net present values, assuming the cost of capital is 5%? 10%? 15%? b. What are the two projects IRRs at these same costs of capital?
Compute the NPV for Project X and accept or reject the project with the cash flows shown below if the appropriate cost of capital is 11 percent. Time: 0 1 2 3 4 5 Cash flow: -165 -165 0 280 255 230
Consider the cash flows for the investment projects given in Table. Assume that the MARR = 10%. (a) Suppose A, B, and C are mutually exclusive projects. Which project would be selected on the basis of the IRR criterion (b) Assume that projects C and È are mutually exclusive. Using the IRR criterion, which Project would you select? Net Cash Flow A В C D E -4,250 3,200 2,850 -4,250 1,500 3,250 1,600 1,200 -4,250 2,850 -4,850 2,100 2,100 2,100 2,100 2,500 1 -835 2,900 1,050 500 2 -835 3 800 -835 4 300 -835
Consider an investment project with the cash flows given in the table below. Compute the IRR for this investment. Is the project acceptable at MARR = 10%? The IRR for this project is %. (Round to one decimal place.) n 0 1 2 3 Cash Flow -$35,000 15,000 14,520 13,990
Consider the cash flows for the investment projects given in Table. Assume that the MARR = 10%. (a) Suppose A, B, and C are mutually exclusive projects. Which project would be selected on the basis of the IRR criterion? (b) Assume that projects C and E are mutually exclusive. Using the IRR criterion, which Project would you select?. Net Cash Flow B D. E -4,850 2,100 2,100 2,500 4,250 3,200 2,850 800 300 4,250 4,250 2,850 2,900 1,050 500 -835 -835 -835 -835 1,500 3.250 1,600 1,200 2,100 2,100
Determine the IRR of the project and the NPV of the project at a cost of capital of 12% using the Excel functions. For the calculation of NPV, includecash flows 1 through 5 in the NPV function and then subtract the initial cost(i.e., = NPV1rate, CF1 CF52 + CF02. For IRR, include cash flows 0 through 5 inthe cash flow range
You are given the following cash flows for a project. Assuming a cost of capital of 12.84 percent. determine the profitability index for this project. Year 0 1 2 3 4 5 O 14981 O 1.68/7 O1.7508 1.6245 1.5613 Cash Flow -$1,115.00 $554.00 $622.00 $648 00 $426.00 $216.00
Compute the MIRR for Project Y and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent. Time: 0 1 2 3 4 5 Cash flow: −5,000 1,000 1,000 0 2,000 2,000
The following are the cash flows of two projects: Project B Year Project A $ (300) 0 $ (300) 1 180 200 2 180 200 3 180 200 4 180 If the opportunity cost of capital is 12%, what is the profitability index for each project? Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Project A B Profitability Index
Two projects being considered are mutually exclusive and have the following projected cash flows: (Compute both NPV and IRR). The cost of capital is 10%. Year Cash Flow A Cash Flow B 0 -50,000 -50,000 1 15,625 0 2 15,625 0 3 15,625 0 4 15,625 0 5 15,625 99,500
You are given the following information about the cash flows for Projects A and B: Project B $12,643.00 $6,264.00 $5.119.00 $4,284.00 $3,265.00 $2,884.00 Year 0 1 2 3 4 5 Given this information, and assuming a risk-adjusted discount rate of 14.0 percent for both projects, determine the internal rate of return (IRR) for the project with the highest net present value (NPV). 26.0818% 25.6301% 25.1784% Project A -$10,356.00 $2,185.00 $4,294.00 $4,642.00 $6,360.00 $3,125.00 O24.2750%