QUESTION 25 Norton & Co. is considering Projects S and L. whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable If the decision is made by choosing the project with the higher IRR. how much value will be forgone? Note that under certain conditions choosing projects on the basis of the IRR will not cause any value to be lost because the one with the higher IRR will also have the higher NPV, 1.e., no conflict will exist. IRR for L is 15.66% and IRR for S 1s 19 86 [Hints: Value is determined by calculating the NPV of projects and you choose a project with higher NPV in the case of mutually exclusive project). WACC 550% 4 CFS $1,025 $650 $450 $250 $50 CFL $1,025 $100 $300 $500 $700 3.
QUESTION 25 Norton & Co. is considering Projects S and L. whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable If the decision is made by choosing the project with the higher IRR. how much value will be forgone? Note that under certain conditions choosing projects on the basis of the IRR will not cause any value to be lost because the one with the higher IRR will also have the higher NPV, 1.e., no conflict will exist. IRR for L is 15.66% and IRR for S 1s 19 86 [Hints: Value is determined by calculating the NPV of projects and you choose a project with higher NPV in the case of mutually exclusive project). WACC 550% 4 CFS $1,025 $650 $450 $250 $50 CFL $1,025 $100 $300 $500 $700 3.
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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Transcribed Image Text:QUESTION 25
Norton & Co. 1s considering Projects S and L., whose cash flows are shown below These projects are mutually
exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR, how
much value will be forgone? Note that under certain conditions choosing projects on the basis of the IRR will not
cause any value to be lost because the one with the higher IRR will also have the higher NPV, i.e, no conflict will
exist. IRR for L 1s 15.66% and IRR for S 1s 19 86 [Hints Value is determined by calculating the NPV of projects and
you choose a project with higher NPV in the case of mutually exclusive project).
WACC
5 50%
2.
3
4
CFS
$1,025 $650
$450
$250
$50
CFL
$1,025 $100
$300
$500
$700
O a. $84.76
O b. $67.64
OC $90.46
O d. $81.50
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