ND Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO believes the IRR is the best selection criterion, while the CFO advocates other methods. If the decision is made by choosing the project with the higher IRR, how much, if any, value will be forgone, i.e., what's the NPV and IRR of the chosen project(s). What is the Payback period and discounted payback period?

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
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ND Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO believes the IRR is the best selection criterion, while the CFO advocates other methods. If the decision is made by choosing the project with the higher IRR, how much, if any, value will be forgone, i.e., what's the NPV and IRR of the chosen project(s). What is the Payback period and discounted payback period?

 

WACC:
7.00%
Year
1
2
3
4
CFs
CFL
-$1,100
-$2,750
$550
$725
$600
$725
$100
$800
$100
$1,400
Transcribed Image Text:WACC: 7.00% Year 1 2 3 4 CFs CFL -$1,100 -$2,750 $550 $725 $600 $725 $100 $800 $100 $1,400
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