rour company is considering two mutually exclusive projects, X and Y, whose costs and cash flovws are showin belovw: Year -$5,000 -$5,000 1 1,000 4,500 1,500 1.500 3 2,000 1,000 4 4,000 500 The projects are equally risky, and their cost of capital is 15%. You must make a recommendation, and you must base it on the modified IRR (MIRR). Calculate the two projects' MIRRS. Do not round intermediate calculations. Round your answers to two decimal places. Project X: Project Y: Vhich project has the higher MIRR? -Select- v has the higher MIRR.

rour company is considering two mutually exclusive projects, X and Y, whose costs and cash flovws are showin belovw: Year -$5,000 -$5,000 1 1,000 4,500 1,500 1.500 3 2,000 1,000 4 4,000 500 The projects are equally risky, and their cost of capital is 15%. You must make a recommendation, and you must base it on the modified IRR (MIRR). Calculate the two projects' MIRRS. Do not round intermediate calculations. Round your answers to two decimal places. Project X: Project Y: Vhich project has the higher MIRR? -Select- v has the higher MIRR.

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 Q requires an initial outlay at t = 0 of $20,000, 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 $26,000, and its expected cash flows would be $13,600 per year for 5 years. If both projects have a WACC of 16%, which project would you recommend? Select the correct answer. a. Neither Project S nor L, since each project's NPV < 0. b. Project S, since the NPVS > NPVL. c. Project L, since the NPVL > NPVS. d. Both Projects S and L, since both projects have IRR's > 0. e. Both Projects S and L, since both projects have NPV's > 0.
Weston Systems is considering the following independent projects for the coming year: Project Required Investment Expected Rate of Return Risk X $8 million 12.5% High Y 8 million 9.5% Average Z 3 million 5.5% Low Weston’s WACC is 9 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects. What would be the minimum acceptable return for each of the three projects? Which project(s) should Weston accept assuming it faces no capital constraints?
Unequal Lives. Kosovski Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and are repeatable. Calculate projects' NPVs using the replacement chain method and recommend the optimal decision. WACC: 9% 0 1 4 Year 2 3 CFS -$100,000 $60,000 $60,000 CFL -$100,000 $40,000 $40,000 $40,000 $40,000
A firm will choose betwen two mutually exclusive projects. Project A costs $15,000 and pays out $25,000 in one year. Project B costs $30,000 and pays out $43,000 in one year. Project A's IRR equals 67% and its NPV = $8,585. Project B's IRR = 43% and its NPV = $10,566. Which project should the firm pick?
Yoga Center Inc. is considering a project that has the following cash flow and cost of capital (r) data. What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected. 11.00% 0 r Year Cash flows a. $167.41 Ob. $147.23 O c. $90.02 O d. $196.23 O e. $177.40 -$1,200 1 $475 2 $450 3 $425 4 $400
You must decide firm which of the proposed projects should be accepted for the upcoming year since only $6 million is available. Which projects should be accepted? Project Cost (millions) NPV(millions) A 3.25 0.80 В 1.75 0.52 C 4.5 0.69 D 3.75 0.95 E 1.25 0.25 F 0.50 0.25
Robinson Robotics is considering two mutually exclusive projects, Project A and Project B. The projects have the following cash flows: Year Project A Cash Flow Project B Cash Flow 0 -$200 -$300 1 20 90 2 30 70 3 40 60 4 50 50 5 60 40 At what cost of capital would the two projects have the same net present value (NPV)? 12.69% 9.32% 10.32% 8.14% None of the above
CVD Ltd needs to choose from three mutually exclusive projects. The net cash flows from the projects will depend on market demand. All of the projects will last for only one year. The forecast net cash flows and their associated probabilities are given below:Market Demand Probability Weak 0.20 Average 0.50 Good 0.30 Market Demand Project A Project B Project C Weak R450 000 R350 000 R550 000 Average R550 000 R400 000 R500 000 Good R650 000 R450 000 R700 000 Required:Calculate the expected value of the net cash flows from each of the three projects.
Nast Inc. 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 MIRR rather than the one with the higher NPV, how much value will be forgone? Note that under some conditions choosing projects on the basis of the MIRR will cause $0.00 value to be lost. WACC: 9.25% CFS CFL 1 2 3 4 -$1,200 $405 $405 $405 $405 -$2,400 $780 $780 $780 $780 0 a. $0.00 b. $210.59 c. $120.02 d. $8.26 e. $7.56
Your team is considering three different projects. They aren't mutually exclusive, allowing to multiple projects. Each project will have an initial cash flow of +$1,000,000, followed by a series of different negative cash flows, lasting for different periods of time. If the cost of capital is 15%, which of the following projects would you accept. Project A 4-year project IRR = 12% Project B 5-year project IRR = 17% Project C 6-year project IRR = 20% Project A Project C Projects A & B Projects B & C
JVA corporation is considering investing in a new project with the estimated cash flows shown below. Compute the NPV for the project and recommend whether the firm should accept or reject it. The required cost of capital is 20 percent. Time Cash Flow 0 1 -100 20 -$13.55, reject O$10.26, reject O $1.90, accept. O $11.34, reject 2 52 3 62
Trovato Corporation is considering a project that would require an investment of $62,000. No other cash outflows would be involved. The present value of the cash inflows would be $77,500. The profitability index of the project is closest to (Ignore income taxes.): Multiple Choice 0.75 O O 0.20 0.25 1.25

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