Projects A and B are mutually exclusive. If project A, the larger project,has an approximate ERR of 20 percent and project B has an approximateERR of 13 percent, which project is better if MARR=10 percent?O AThe incremental ERR method is required to determine the better project.Neither A nor B is valid.B*For our purposes, a project is valid if its internal rate of return (IRR) isless than MARR.equal to or larger than MARR.less than 0 percent.larger than MARR.

The economic rate of return (ERR) is a rate of return being used in capital budgeting to monitor and…

Projects A and B are mutually exclusive. If project A, the larger project, has an approximate ERR of 20 percent and project B has an approximate ERR of 13 percent, which project is better if MARR=10 percent? The incremental ERR method is required to determine the better project. Neither A nor B is valid. OB For our purposes, a project is valid if its internal rate of return (IRR) is * less than MARR. equal to or larger than MARR. less than 0 percent. larger than MARR.

Projects A and B are mutually exclusive. If project A, the larger project, has an approximate ERR of 20 percent and project B has an approximate ERR of 13 percent, which project is better if MARR=10 percent? The incremental ERR method is required to determine the better project. Neither A nor B is valid. OB For our purposes, a project is valid if its internal rate of return (IRR) is * less than MARR. equal to or larger than MARR. less than 0 percent. larger than MARR.

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Projects A and B are mutually exclusive. If project A, the larger project,
has an approximate ERR of 20 percent and project B has an approximate
ERR of 13 percent, which project is better if MARR=10 percent?
O A
The incremental ERR method is required to determine the better project.
Neither A nor B is valid.
B
*
For our purposes, a project is valid if its internal rate of return (IRR) is
less than MARR.
equal to or larger than MARR.
less than 0 percent.
larger than MARR.

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When two mutually exclusive projects are being compared, explain why the short-term project might be ranged higher under the NVP criterion if the cost of the capital is high, whereas the long-term project might be deemed better if the cost of capital is low. Would changes in the cost of capital ever cause a change in the IRR ranking of two such projects? Why or why not?
The internal rate of return (IRR) is the: Multiple Choice discount rate that results in a zero net present value for the project. discount rate that causes a project's aftertax income to equal zero.
Basic NPV methods tell us that the value of a project today is NPV0. Time value of money issues also lead us to believe that if we choose not to do the project that it will be worth NPV1 one period from now, such that NPV0 > NPV1. Why then do we see some firms choosing to defer taking on a project. Be complete and thorough in your answer.
Subject :- Accounting
In calculating the Net Present Value, the project would be acceptable if the outcome was: Group of answer choices Positive Positive or Zero Zero Negative
You are considering the following two mutually exclusive projects. The crossover rate between these two projects is ___ percent and Project ___ should be accepted if the required return is greater than the crossover rate. Year Project A Project B 0 −$ 31,000 −$ 31,000 1 12,000 20,140 2 12,000 10,000 3 20,000 12,160
NPV & IRR Refer to the scenario above. The project(s) you select may vary depending on the WACC and whether the projects are independent or mutually exclusive. Which statement is INCORRECT? If the projects are independent and the WACC is 11.0%, both projects A and B are acceptable. If the projects are independent, Project A would be acceptable if the WACC is 17%, but Project B would not. If a project's NPV is negative, the project cannot be accepted. If the projects are mutually exclusive and the WACC is 11.0%, only project B is acceptable. If the projects are mutually exclusive and the WACC is 6.0%, only project B is acceptable.
2) The expected return of Project Y is at least equal to the expected return of Project X, and the variance of Y is less than that of X. What would you do? A) Prefer Project Y B) Accept both projects C) Prefer Project X D) Reject both projects.
If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is: Select one: O a. equal to 16% O b. greater than 16% O c. less than 16% O d. cannot be determined from this data
e. IMPORTANT Note that from this example that a higher IRR for a nindividual alternative does not gurantee that the alternatvie is more economical than the one with a lower IRR. It is the incremental IRR value relative to the MARR that determines which alternative is more economical. The result of the incremental analysis are always the same as those of the PW,AW, or FW anaylsis
What would you recommend if the benefit / cost ratio is >1: Select one: a. The project must be accepted. b. Benefit / cost ratio cannot be >1 c. The project must be rejected. d. Benefit / cost ratio always =1
Project Analysis. Assume that you are evaluating the following three mutually exclusive projects: A. Complete the following analyses. (For the last two lines, Terminal Value, please write in the dollar amount of the terminal value.) B. Compare and explain the conflicting rankings of the NPVs and TRRs versus the IRRs. C. Using different discount rates, is it possible to get different rankings within the NPV calculation? Why or why not? D. If 10 percent is the required return, which project is preferred? E. Which is the fairer representation of these two projects, TRR or IRR? Why?

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