Project S requires an initial outlay at t = 0 of $10,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $41,500, and its expected cash flows would be $10, 950 per year for 5 years. If both projects have a WACC of 15%, which project would you recommend? Select the correct answer. a. Project S, because the NPVS > NPVL. b. Project L, because the NPVL > NPVS. c. Neither Project S nor L, because each project's NPV < 0. d. Both Projects S and L, because both projects have NPV's > 0. e. Both Projects S and L, because both projects have IRR's > 0.
Project S requires an initial outlay at t = 0 of $10,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $41,500, and its expected cash flows would be $10, 950 per year for 5 years. If both projects have a WACC of 15%, which project would you recommend? Select the correct answer. a. Project S, because the NPVS > NPVL. b. Project L, because the NPVL > NPVS. c. Neither Project S nor L, because each project's NPV < 0. d. Both Projects S and L, because both projects have NPV's > 0. e. Both Projects S and L, because both projects have IRR's > 0.
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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Project S requires an initial outlay at t = 0 of $10,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $41,500, and its expected cash flows would be $10, 950 per year for 5 years. If both projects have a WACC of 15%, which project would you recommend?
Select the correct answer.
a. Project S, because the NPVS > NPVL.
b. Project L, because the NPVL > NPVS.
c. Neither Project S nor L, because each project's NPV < 0.
d. Both Projects S and L, because both projects have NPV's > 0.
e. Both Projects S and L, because both projects have
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