M/s Sons & Sons is considering two projects, A &B, with cash flows as shown below: Cash Flow of period Project A Project B -90,000 30,000 30,000 -150,000 1 72,000 35,000 3 30,000 40,000 25,000 4 30,000 a. Calculate discounted payback period, net present value and intermal rate of return for each project using opportunity cost of capital 13 % & 9% for project A & B respectively.
M/s Sons & Sons is considering two projects, A &B, with cash flows as shown below: Cash Flow of period Project A Project B -90,000 30,000 30,000 -150,000 1 72,000 35,000 3 30,000 40,000 25,000 4 30,000 a. Calculate discounted payback period, net present value and intermal rate of return for each project using opportunity cost of capital 13 % & 9% for project A & B respectively.
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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![M/s Sons & Sons is considering two projects, A & B, with cash flows as shown below:
Cash Flow of
period
Project A
Project B
-90,000
-150,000
1
30,000
72,000
2
30,000
35,000
3
30,000
40,000
4
30,000
25,000
a. Calculate discounted payback period, net present value and intemal rate of retum for each project
using opportunity cost of capital 13 % & 9% for project A & B respectively.
b. Which project(s) should be accepted if:
The projects are mutually exclusive and there is no capital constraint.
The projects are independent and there is no capital constraint.
The projects are independent and there is a total of $100,000 of financing for capital
outlays in the coming period.
(ii)
c. Why the cost of capital for A might be higher than for B. State possible reason(s)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbd461b43-a8d8-45ef-baa5-5fc830055300%2F1ae9a605-8d41-42a7-b778-b9eba5f8a64e%2Fifc0bv_processed.png&w=3840&q=75)
Transcribed Image Text:M/s Sons & Sons is considering two projects, A & B, with cash flows as shown below:
Cash Flow of
period
Project A
Project B
-90,000
-150,000
1
30,000
72,000
2
30,000
35,000
3
30,000
40,000
4
30,000
25,000
a. Calculate discounted payback period, net present value and intemal rate of retum for each project
using opportunity cost of capital 13 % & 9% for project A & B respectively.
b. Which project(s) should be accepted if:
The projects are mutually exclusive and there is no capital constraint.
The projects are independent and there is no capital constraint.
The projects are independent and there is a total of $100,000 of financing for capital
outlays in the coming period.
(ii)
c. Why the cost of capital for A might be higher than for B. State possible reason(s)
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