Value/other investment criteria (i Saved Help Save Consider the following two projects: Cash flows Project A Project B -$270 CO -$270 С1 115 143 C2 115 143 Сз 115 143 C4 115 a. If the opportunity cost of capital is 10%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 10%. Which one would you choose if the cost of capital is 15%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 10%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below. Req E Req F Req A Req D Req C Req G Req B Req H 1 Req H 3 Req H 2 If the opportunity cost of capital is 10%, which of these two projects would you accept (A, B,
Value/other investment criteria (i Saved Help Save Consider the following two projects: Cash flows Project A Project B -$270 CO -$270 С1 115 143 C2 115 143 Сз 115 143 C4 115 a. If the opportunity cost of capital is 10%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 10%. Which one would you choose if the cost of capital is 15%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 10%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below. Req E Req F Req A Req D Req C Req G Req B Req H 1 Req H 3 Req H 2 If the opportunity cost of capital is 10%, which of these two projects would you accept (A, B,
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:Value/other investment criteria (i
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Consider the following two projects:
Cash flows
Project A Project B
-$270
CO
-$270
С1
115
143
C2
115
143
Сз
115
143
C4
115
a. If the opportunity cost of capital is 10%, which of these two projects would you accept (A, B, or both)?
b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 10%.
Which one would you choose if the cost of capital is 15%?
d. What is the payback period of each project?
e. Is the project with the shortest payback period also the one with the highest NPV?
f. What are the internal rates of return on the two projects?
g. Does the IRR rule in this case give the same answer as NPV?
h-1. If the opportunity cost of capital is 10%, what is the profitability index for each project?
h-2. Is the project with the highest profitability index also the one with the highest NPV?
h-3. Which measure should you use to choose between the projects?
Complete this question by entering your answers in the tabs below.
Req E
Req F
Req A
Req D
Req C
Req G
Req B
Req H 1
Req H 3
Req H 2
If the opportunity cost of capital is 10%, which of these two projects would you accept (A, B,
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