Project A would cost $44,383.00 today and have the following other expected cash flows: $27,842.00 in 1 year, $18,921.00 in 2 years, $4,722.00 in 3 years, and $3,185.00 in 4 years. The cost of capital for project A is 11.88 percent. Project B would cost $97,631.00 today and have the following other expected cash flows: $55,937.00 in 1 year, $24,612.00 in 2 years, $27,364.00 in 3 years, and $2,415.00 in 4 years. The cost of capital for project B is 7.73 percent Statement 1: Project A would be accepted based on the project's internal rate of return (IRR) and the IRR rule Statement 2: Project B would be accepted based on the project's payback period and the payback rule if the payback threshold is 2.90 years Statement 1 is true and statement 2 is true Statement 1 is true and statement 2 is false Statement 1 is false and statement 2 is true Statement 1 is false and statement 2 is false
Project A would cost $44,383.00 today and have the following other expected cash flows: $27,842.00 in 1 year, $18,921.00 in 2 years, $4,722.00 in 3 years, and $3,185.00 in 4 years. The cost of capital for project A is 11.88 percent. Project B would cost $97,631.00 today and have the following other expected cash flows: $55,937.00 in 1 year, $24,612.00 in 2 years, $27,364.00 in 3 years, and $2,415.00 in 4 years. The cost of capital for project B is 7.73 percent Statement 1: Project A would be accepted based on the project's internal rate of return (IRR) and the IRR rule Statement 2: Project B would be accepted based on the project's payback period and the payback rule if the payback threshold is 2.90 years Statement 1 is true and statement 2 is true Statement 1 is true and statement 2 is false Statement 1 is false and statement 2 is true Statement 1 is false and statement 2 is false
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 10P: Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year...
Question
![Project A would cost $44,383.00 today and have the following other expected cash flows: $27,842.00 in 1 year, $18,921.00 in 2 years, $4,722.00 in 3 years, and
$3,185.00 in 4 years. The cost of capital for project A is 11.88 percent. Project B would cost $97,631.00 today and have the following other expected cash flows:
$55,937.00 in 1 year, $24,612.00 in 2 years, $27,364.00 in 3 years, and $2,415.00 in 4 years. The cost of capital for project B is 7.73 percent
Statement 1: Project A would be accepted based on the project's internal rate of return (IRR) and the IRR rule
Statement 2: Project B would be accepted based on the project's payback period and the payback rule if the payback threshold is 2.90 years
Statement 1 is true and statement 2 is true
Statement 1 is true and statement 2 is false
Statement 1 is false and statement 2 is true
Statement 1 is false and statement 2 is false](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F19d0c0ee-b2f7-4400-bddc-d84e0eebb818%2Fc8e5a57d-79d1-4f3f-a059-9d94589bc7ca%2F9qib156_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Project A would cost $44,383.00 today and have the following other expected cash flows: $27,842.00 in 1 year, $18,921.00 in 2 years, $4,722.00 in 3 years, and
$3,185.00 in 4 years. The cost of capital for project A is 11.88 percent. Project B would cost $97,631.00 today and have the following other expected cash flows:
$55,937.00 in 1 year, $24,612.00 in 2 years, $27,364.00 in 3 years, and $2,415.00 in 4 years. The cost of capital for project B is 7.73 percent
Statement 1: Project A would be accepted based on the project's internal rate of return (IRR) and the IRR rule
Statement 2: Project B would be accepted based on the project's payback period and the payback rule if the payback threshold is 2.90 years
Statement 1 is true and statement 2 is true
Statement 1 is true and statement 2 is false
Statement 1 is false and statement 2 is true
Statement 1 is false and statement 2 is false
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