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Chapter 22 EOC problems 10-18 Problem 22-11 Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm's cost of capital is 12 percent. Cash Inflows Q S Year 1 2 $1,200 $357 357 357 357 Q Search this co i 3 4 a. According to the net present value method of capital budgeting, which investment(s) should the firm make? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. NPV (Investment Quick): $ NPV (Investment Slow): $ 71.60 84.69 The firm should make investment(s) slow b. According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? Use Appendix D to answer the question. Round your answers to the nearest whole number. IRR (Investment Quick): 20 % IRR (Investment Slow): 16 % The firm should make investment(s) Quick c. If Q is chosen, the $1,200 can be reinvested and earn 14 percent. Does this information alter your conclusions concerning investing in Q and S? To answer, assume that S's cash flows can be reinvested at its internal rate of return. Use the rounded internal rate of return from part b. Use Appendix A and Appendix C to answer the question. Round your answers to the nearest cent. Terminal value (Investment Quick): $ Terminal value (Investment Slow): $ The firm should make investment(s) slow × Would your answer be different if S's cash flows were reinvested at the cost of capital (12 percent)? Use Appendix C to answer the question. Round your answer to the nearest cent. Terminal value (Investment Slow): $ The firm should make investment(s) Quick MacBook Air

Chapter 22 EOC problems 10-18 Problem 22-11 Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm's cost of capital is 12 percent. Cash Inflows Q S Year 1 2 $1,200 $357 357 357 357 Q Search this co i 3 4 a. According to the net present value method of capital budgeting, which investment(s) should the firm make? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. NPV (Investment Quick): $ NPV (Investment Slow): $ 71.60 84.69 The firm should make investment(s) slow b. According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? Use Appendix D to answer the question. Round your answers to the nearest whole number. IRR (Investment Quick): 20 % IRR (Investment Slow): 16 % The firm should make investment(s) Quick c. If Q is chosen, the $1,200 can be reinvested and earn 14 percent. Does this information alter your conclusions concerning investing in Q and S? To answer, assume that S's cash flows can be reinvested at its internal rate of return. Use the rounded internal rate of return from part b. Use Appendix A and Appendix C to answer the question. Round your answers to the nearest cent. Terminal value (Investment Quick): $ Terminal value (Investment Slow): $ The firm should make investment(s) slow × Would your answer be different if S's cash flows were reinvested at the cost of capital (12 percent)? Use Appendix C to answer the question. Round your answer to the nearest cent. Terminal value (Investment Slow): $ The firm should make investment(s) Quick MacBook Air

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter23: Other Topics In Working Capital Management
Section: Chapter Questions
Problem 2P: Optimal Cash Transfer Barenbaum Industries projects that cash outlays of 4.5 million will occur...
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Chapter 22 EOC problems 10-18 Problem 22-11 Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm's cost of capital is 12 percent. Cash Inflows Q S Year 1 2 $1,200 $357 357 357 357 Q Search this co i 3 4 a. According to the net present value method of capital budgeting, which investment(s) should the firm make? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. NPV (Investment Quick): $ NPV (Investment Slow): $ 71.60 84.69 The firm should make investment(s) slow b. According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? Use Appendix D to answer the question. Round your answers to the nearest whole number. IRR (Investment Quick): 20 % IRR (Investment Slow): 16 % The firm should make investment(s) Quick c. If Q is chosen, the $1,200 can be reinvested and earn 14 percent. Does this information alter your conclusions concerning investing in Q and S? To answer, assume that S's cash flows can be reinvested at its internal rate of return. Use the rounded internal rate of return from part b. Use Appendix A and Appendix C to answer the question. Round your answers to the nearest cent. Terminal value (Investment Quick): $ Terminal value (Investment Slow): $ The firm should make investment(s) slow × Would your answer be different if S's cash flows were reinvested at the cost of capital (12 percent)? Use Appendix C to answer the question. Round your answer to the nearest cent. Terminal value (Investment Slow): $ The firm should make investment(s) Quick MacBook Air
Transcribed Image Text:Chapter 22 EOC problems 10-18 Problem 22-11 Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm's cost of capital is 12 percent. Cash Inflows Q S Year 1 2 $1,200 $357 357 357 357 Q Search this co i 3 4 a. According to the net present value method of capital budgeting, which investment(s) should the firm make? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. NPV (Investment Quick): $ NPV (Investment Slow): $ 71.60 84.69 The firm should make investment(s) slow b. According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? Use Appendix D to answer the question. Round your answers to the nearest whole number. IRR (Investment Quick): 20 % IRR (Investment Slow): 16 % The firm should make investment(s) Quick c. If Q is chosen, the $1,200 can be reinvested and earn 14 percent. Does this information alter your conclusions concerning investing in Q and S? To answer, assume that S's cash flows can be reinvested at its internal rate of return. Use the rounded internal rate of return from part b. Use Appendix A and Appendix C to answer the question. Round your answers to the nearest cent. Terminal value (Investment Quick): $ Terminal value (Investment Slow): $ The firm should make investment(s) slow × Would your answer be different if S's cash flows were reinvested at the cost of capital (12 percent)? Use Appendix C to answer the question. Round your answer to the nearest cent. Terminal value (Investment Slow): $ The firm should make investment(s) Quick MacBook Air
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