Question 4:Consider projects A and B:Cash Flows (dollars)Project COC2 NPV at 11%C122,600 22,600 +$6,70335,000 35,000 +7,938A-32,000B-52,000a. Calculate IRRs for A and B.b. Which project does the IRR rule suggest is best?

Internal Rate of Return (IRR) is the rate at which the Net Present Value of the project is zero. If…

Consider projects A and B: Cash Flows (dollars) Project CO C1 C2 22,600 22,600 +$6,703 35,000 35,000 +7,938 NPV at 11% A -32,000 B -52,000 a. Calculate IRRs for A and B. b. Which project does the IRR rule suggest is best?

Consider projects A and B: Cash Flows (dollars) Project CO C1 C2 22,600 22,600 +$6,703 35,000 35,000 +7,938 NPV at 11% A -32,000 B -52,000 a. Calculate IRRs for A and B. b. Which project does the IRR rule suggest is best?

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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Here are the cash flows for two mutually exclusive projects: Project C0 C1 C2 C3 A -$20,000 +$8,000 +$8,000 +$ 10,000 B - 20,000 0 +10,000 + 25,000 a. What is the IRR of each project? b. Investor's expected return is based on risk free rate equal 3% and market risk premium 18%, given beta 1.25, evaluate its investment criteria.
Project A B Cash Flows (dollars) C1 21,800 34,000 Project A B Со -31,000 -51,000 a. Calculate IRRs for A and B. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project A Project B IRR % % Project A O Project B C2 21,800 34,000 b. Which project does the IRR rule suggest is best? c. Which project is really best? NPV at 12% + $5,843.11 + 6,461.73
Consider the following two mutually exclusive projects. Time Project A Project B 0 -$300 -$405 1 -$387 $134 2 -$193 $134 3 $100 $134 4 $600 $134 5 $600 $134 6 $850 $150 7 $180 $284 What is each project’s payback, discounted payback, IRR, and NPV with a cost of capital of 12%? Which project should be selected?
Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –5,300 1,300 1,300 2,700 0 B –700 0 600 2,300 3,300 C –5,200 3,400 1,700 800 300 a. What is the payback period on each of the above projects? (Round your answers to 2 decimal places.) b. Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?multiple choice 1 Project A Project B and Project C Project A and Project B Project A, Project B, and Project C Project C Project A and Project C Project B None c. If you use a cutoff period of three years, which projects would you accept?multiple choice 2 Project A, Project B, and Project C Project A Project B Project A and Project C Project C Project A and Project B Project B and Project C d. If the opportunity cost of capital is 10%, which projects have positive NPVs?multiple choice 3 Project B Project C Project A,…
NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B 0 -$290 -$400 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 Construct NPV profiles for Projects A and B. Select the correct graph. (see image) 2. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A % Project B % 3. Calculate the two projects' NPVs, if you were told that each project's cost of capital was 14%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $ Project B $ Which project, if either, should be selected? Calculate the two projects' NPVs, if the cost of capital was 17%. Do not round intermediate calculations. Round your answers to the nearest cent.Project A $ Project B $ Which project would be the proper…
Consider the following information: Cash Flows ($) Project C0 C1 C2 C3 C4 A –5,300 1,300 1,300 2,700 0 B –700 0 600 2,300 3,300 C –5,200 3,400 1,700 800 300 a. What is the payback period on each of the above projects? (Round your answers to 2 decimal places.) b. Given that you wish to use the payback rule with a cutoff period of two years, which projects would you accept?multiple choice 1 Project A Project B and Project C Project A and Project B Project A, Project B, and Project C Project C Project A and Project C Project B None c. If you use a cutoff period of three years, which projects would you accept?multiple choice 2 Project A, Project B, and Project C Project A Project B Project A and Project C Project C Project A and Project B Project B and Project C d. If the opportunity cost of capital is 10%, which projects have positive NPVs?multiple choice 3 Project B Project C Project A,…
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Consider two mutually exclusive projects A and B: Cash Flows (dollars) Project Co A -39,500 B -59,500 C₁ 28,600 42,500 C₂ NPV at 11% 28,600 +$ 9,478 42,500 +13,282 a. Calculate IRRS for A and B. Note: Do not round intermediate calculations. Enter your answers as a perc Project A B IRR % % b. Which project does the IRR rule suggest is best? Project A Project B c. Which project is really best? Project A Project B P
Consider two mutually exclusive projects A and B: Cash Flows (dollars) Project Co A B -39,000 -59,000 C₁ C₂ NPV at 10% 28,200 28,200 +$ 9,942 42,000 42,000 +13,893 a. Calculate IRRs for A and B. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Project A B Answer is not complete. IRR % %
am. 111.
Question Compute the IRR statistic for Project A and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 12 %. Time 1 2 3 4 5 Cash Flow ($92,000$42.999 $45,668 $38,554 $36,778 $47,000 O The project's IRR is 36.3 % and the project should be accepted. O The project's IRR is 65.5 % and the project should be accepted. O The project's IRR is 23.9 % and the project should be rejected.. O The project's IRR is 43.2 % and the project should be accepted.
Consider the following two mutually exclusive projects: What is the incremental IRR? Cash Flows ($) Project C0 C1 C2 C3 A -90 +60 +50 0 B -100 0 0 +140 Multiple Choice The incremental IRR is 6% The incremental IRR is 20% The incremental IRR is 9.6% The incremental IRR is 15%

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