Projects A and B are equally risky, mutually exclusive, and have normal cash flows. Project A has an IRR of15%, while Project B's IRR is 12%. The two projects have the same NPV when the cost of capital is 7%. Whichof the following statements is CORRECT?O If the cost of capital is 10%, both projects will have positive NPVS.O the cost of capital is 13%, Project A will have the lower NPV.O If the cost of capital is 6%, Project A will have the higher NPV.O If the cost of capital is 10%, both projects will have a negative NPV.O Project A's NPV is more sensitive to changes in cost of capital than Project B's.

The question is based on the concept of capital budgeting and different techniques of capital…

Projects A and B are equally risky, mutually exclusive, and have normal 15%, while Project B's IRR is 12%. The two projects have the same NPV when the cost of capital is 7%. Which of the following statements is CORRECT? flows. Project O If the cost of capital is 10%, both projects will have positive NPVS. O If the cost of capital is 13%, Project A will have the lower NPV. O If the cost of capital is 6%, Project A will have the higher NPV. O If the cost of capital is 10%, both projects will have a negative NPV. O Project A's NPV is more sensitive to changes in cost of capital than Project B's.

Projects A and B are equally risky, mutually exclusive, and have normal 15%, while Project B's IRR is 12%. The two projects have the same NPV when the cost of capital is 7%. Which of the following statements is CORRECT? flows. Project O If the cost of capital is 10%, both projects will have positive NPVS. O If the cost of capital is 13%, Project A will have the lower NPV. O If the cost of capital is 6%, Project A will have the higher NPV. O If the cost of capital is 10%, both projects will have a negative NPV. O Project A's NPV is more sensitive to changes in cost of capital than Project B's.

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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If the required rate of return of a project is 17% and the IRR rate is calculated as 15%. Identify from the following the correct decision statement. a. Yes, we can Accept the project b. None of the options c. Yes, we can accept the project if required rate change to 14% d. No, we need to reject the project
103.
Project X has an initial investment at time O of $1,000 and it returns $250 one year from now and$1,000 two years from now. Project Y has an initial investment at time O of $2,000 and it returns$2,534.40 two years from now. The risk level and the net present values of the two projects areequal. Calculate the required return for project X. Answer: 12% please do not solve with excel
The table below shows internal rate of return for three investment projects A, B and C and there differences. By capital investment, A B> A O b. A>C> B O c. C>A> B O d. B>A> c O e. A>B> C
Suppose x1, x2, and x3 are binary variables that are equal to 1 if the corresponding project (1, 2, or 3) is selected and 0 if the corresponding project is not selected. Also, suppose that y1, y2, and y3 are variables that indicate the amount of money invested in the projects (projects can only be invested in if they are selected). The maximum investment is $2000 for project 1, $4000 for project 2, and $6000 for project 3. Which of the following constraints is needed for this problem? x3 ≤ 6000y3 6000x3 ≤ y3 6000y3 ≤ x3 y3 ≤ 6000x3
Consider the following figure. If firm A were to use the average or composite WACC it would Rate of Return 13.0 (5) 11.0 10.0 90 Project L 70 70 Division L's WACC О Riskov Division H's WACC WACC Project H Composite WACC Firm A Risk Riskov O accept Project L and reject Project H O be making the right decisions on acceptance or rejection of both projects O accept both Project L and Project H O reject both Project L and Project H O accept Project H and reject Project L
PLEASE ANSWER ASAP.....
The table below shows internal rate of return for three investment projects A, B and C and there differences. By capital investment, A С> В O b. B > C>A O C. A> B>C O d. C>A>B O e. C> B> A
Two investments, A and B, cost the same but have different cash flows. The IRR for Investment A is 24% while the IRR for Investment B is 19%. If a required return of 16% is used, however, the NPVs of the two investment are the same. What is the range of required returns in which: a. You would choose A over B? c. You would choose B over A?
A project has the following NPVs at the indicated costs of capital: +$100 at 8%; +$25 at 9%; -$50 at 10%; -$100 at 11%. Which of the following is TRUE regarding this project's IRR? OA. The IRR is below 9%. B. The IRR is about 11%. C. The IRR is between 10% and 11%. D. The IRR is closer to 9% than to 10%.
The table below shows internal rate of retum for three investment projects A, B and C and there differences. By capital investment, A
If the profitability index of a normal investment project is 0.5 and the initial investment required for the project is $ 2m, which of the below statements is incorrect? The project is worthwhile. The present value of cash inflows is $ 1m. The present value of cash inflows is $ 3m. The project has an NPV of $ 1m.

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