Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15 percent. Year Deepwater Fishing New Submarine Ride 0-$960,000-$1,870,000 1 380,000 920,000 2 518,000 810,000 3 430,000 770,000 Calculate NPV

Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 15 percent. Year Deepwater Fishing New Submarine Ride 0-$960,000-$1,870,000 1 380,000 920,000 2 518,000 810,000 3 430,000 770,000 Calculate NPV

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 21P

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Consider the follow cash flows on two mutually exclusive projects for the bahamas recreation corporation Both projects require an annual return of 14 percent year Deepwater New Sub 0 -875,000 -1,650,000 1 330,000 890,000 2 480,000 730,000 3 $440,000 590,000
NPV versus IRR Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 14 percent. Deepwater Fishing -$725,000 270,000 420,000 380,000 Year 0 1 2 3 New Submarine Ride -$1,450,000 820,000 650,000 540,000 As a financial analyst for BRC, you are asked the following questions: a. If your decision rule is to accept the project with the greater IRR, which project should you choose? b. Because you are fully aware of the IRR rule's scale problem, you calculate the incremental IRR for the cash flows. Based on your computation, which project should you choose? c. To be prudent, you compute the NPV for both projects. Which project should you choose? Is it consistent with the incremental IRR rule?
Do C3 part Consider the following cash flows on two mutually exclusive projects for the Bahamas Recreation Corporation (BRC). Both projects require an annual return of 17 percent. Year Deepwater Fishing New Submarine Ride 0 −$ 1,000,000 −$ 1,950,000 1 420,000 1,000,000 2 550,000 850,000 3 470,000 850,000 a-1. Compute the IRR for both projects. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2. Based on the IRR, which project should you choose? multiple choice 1 Deepwater Fishing Submarine Ride b-1. Calculate the incremental IRR for the cash flows. (Do not round intermediate calculations and…
Consider the following cash flows on two mutually exclusive projects for the B.C. Recreation Corporation (BCRC). Both projects require an annual return of 13 percent. aw Bubmarine Ride - 51,950, D0 Year Deupvater Fishing -5530,000 230,000 1,150, D00 000 ,39ב 700, D00 250,000 790, DD0 As a financial analyst for BCRC, you are asked to answer the following questions: a-1. Calculate the IRR for both projects. (Do not round Intermediate calculations. Round the answer to 2 decimal places.) Deepvater Finhing Nuw Subnarine Ride a-2. If your decision rule is to accept the project with the greater IRR, which project should you choose? O Deepwater Fishing O New Submarine Ride b-1. Calculate the incremental IRR for the projects. (Do not round intermediate calculations. Round the answer to 2 decimal places.) Incremental IRR b-2. Because you are fully aware of the IRR rule's scale problem, you calculate the incremental IAR for the cash flows. Based on your computation, which project should you…
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Two mutually exclusive projects have the estimated cash flows shown. Use a present worth analysis to determine which should be selected at an interest rate of 10% per year.
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