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Cullumber Corp. management is evaluating two independent projects. The costs and expected cash flows are given in the following table. The cost of capital is 13.73 percent. Year 0 1 2 3 4 5 Project A - $287,839 109,300 109,300 109,300 109,300 109,300 Project B - $401,058 138,190 162,830 179,500 118,800 a. Calculate the projects' NPV. (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) The NPV of project A is $ The IRR of Project A is There is b. Calculate the projects' IRR. (Round answer to 2 decimal places, e.g. 15.25%.) 119,800 Cullumber should choose Cullumber should choose c. Which project should be chosen based on NPV? Based on IRR? Is there a conflict? and project B is $ % and Project B is will be accepted. ◆ based on NPV. based on IRR. between the NPV and IRR decisions. d. If you are the decision maker for the firm, which project or projects will be accepted? %.

Cullumber Corp. management is evaluating two independent projects. The costs and expected cash flows are given in the following table. The cost of capital is 13.73 percent. Year 0 1 2 3 4 5 Project A - $287,839 109,300 109,300 109,300 109,300 109,300 Project B - $401,058 138,190 162,830 179,500 118,800 a. Calculate the projects' NPV. (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) The NPV of project A is $ The IRR of Project A is There is b. Calculate the projects' IRR. (Round answer to 2 decimal places, e.g. 15.25%.) 119,800 Cullumber should choose Cullumber should choose c. Which project should be chosen based on NPV? Based on IRR? Is there a conflict? and project B is $ % and Project B is will be accepted. ◆ based on NPV. based on IRR. between the NPV and IRR decisions. d. If you are the decision maker for the firm, which project or projects will be accepted? %.

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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Cullumber Corp. management is evaluating two independent projects. The costs and expected cash flows are given in the following table. The cost of capital is 13.73 percent. Year 0 1 2 3 4 5 Project A - $287,839 109,300 109,300 109,300 109,300 109,300 Project B - $401,058 The NPV of project A is $ There is The IRR of Project A is a. Calculate the projects' NPV. (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) 138,190 Cullumber should choose 162,830 b. Calculate the projects' IRR. (Round answer to 2 decimal places, e.g. 15.25%.) Cullumber should choose 179,500 118,800 119,800 c. Which project should be chosen based on NPV? Based on IRR? Is there a conflict? and project B is $ % and Project B is will be accepted. ◆ based on NPV. based on IRR. between the NPV and IRR decisions. d. If you are the decision maker for the firm, which project or projects will be accepted? %.
Transcribed Image Text:Cullumber Corp. management is evaluating two independent projects. The costs and expected cash flows are given in the following table. The cost of capital is 13.73 percent. Year 0 1 2 3 4 5 Project A - $287,839 109,300 109,300 109,300 109,300 109,300 Project B - $401,058 The NPV of project A is $ There is The IRR of Project A is a. Calculate the projects' NPV. (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) 138,190 Cullumber should choose 162,830 b. Calculate the projects' IRR. (Round answer to 2 decimal places, e.g. 15.25%.) Cullumber should choose 179,500 118,800 119,800 c. Which project should be chosen based on NPV? Based on IRR? Is there a conflict? and project B is $ % and Project B is will be accepted. ◆ based on NPV. based on IRR. between the NPV and IRR decisions. d. If you are the decision maker for the firm, which project or projects will be accepted? %.
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