Y-Bar uses IRR to evaluate projects. The company has a cost of capital of 15% They are currently comparing two mutually exclusive projects with the following projected cash flows: Project X -R500 000,00 -R360 000,00 Project Y Initial Investment Annual Cash flows R25 000,00 R100 000,00 R60 000,00 R250 000,00 R250 000,00 R400 000,00 Year 1 Year 2 R60 000,00 Year 3 Year 4 R90 000,00 Based on the information above, which statement is most accurate: a) The company will select project Y as it has the highest IRR. The company will not select either project X or Y on the bases of IRR. The company will select both project X and Y as the IRR of the projects are very simil= None of the above The company will select project Y as it has the highest NPV.

Y-Bar uses IRR to evaluate projects. The company has a cost of capital of 15% They are currently comparing two mutually exclusive projects with the following projected cash flows: Project X -R500 000,00 -R360 000,00 Project Y Initial Investment Annual Cash flows R25 000,00 R100 000,00 R60 000,00 R250 000,00 R250 000,00 R400 000,00 Year 1 Year 2 R60 000,00 Year 3 Year 4 R90 000,00 Based on the information above, which statement is most accurate: a) The company will select project Y as it has the highest IRR. The company will not select either project X or Y on the bases of IRR. The company will select both project X and Y as the IRR of the projects are very simil= None of the above The company will select project Y as it has the highest NPV.

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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Q.2. You must analyze two projects, X and Y. Each project costs $10,000, and the firm's WACC is 12%. The expected cash flows as follows: Project X Project Y 0 -$10,000 -$10,000 $6,500 $3,500 2 $3,000 $3,500 3 $3,000 $3,500 4 $1,000 $3,500 a. Calculate each project's NPV. b. According to NPV method, which project(s) should be accepted, and why?
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1 2 3 4 Project S -$1,000 $875.31 $260 $15 $5 Project L -$1,000 $5 $240 $400 $813.71 The company's WACC is 9.5%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places. %
A firm whose cost of capital is 10% is considering two mutually exclusive projects X and Y, the details of which are: Year Project X Project Y Cost X 70 000 Y 70 000 Cash inflows 1 10 000 50 000 2 20 000 40 000 3 30 000 20 000 4 45 000 10 000 5 60 000 10 000 Calculate the following: Net Present Value at 10% for both projects Profitability Index for both projects Internal Rate of Return of the two project
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A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1 2 3 4 Project S -$1,000 $875.58 $260 $10 $15 Project L -$1,000 $0 $250 $380 $843.71 The company's WACC is 10.0%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places.
Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $234,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows Project C1 Project C2 Year 1 $ 14,000 $ 98,000 Year 2 110,000 98,000 Year 3 170,000 98,000 Totals $ 294,000 $ 294,000 a. The company requires a 10% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted.b. Using the answer from part a, is the internal rate of return higher or lower than 10% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1 2 3 4 Project S -$1,000 $884.00 $250 $15 $15 Project L -$1,000 $0 $250 $400 $805.87 The company's WACC is 9.0%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places. ___%
Determine which of the following independent projects should be selected for investment if a maximum of $240,000 is available and the MARR is 10% per year. Use the PW method to evaluate mutually exclusive bundles to perform your analysis. Construct the cash flow diagram for each. Investment, Net Cash Flow, $ per year Life, Project years S -100,000 50,000 8 M -125,000 24,000 8 A -120,000 75,000 8. -220,000 39,000 8 -200,000 82,000 8.
As the financial manager of Soloi Ltd, you are required to analyse two proposed capital investments, namely Projects 02AD and 02ZT. Each has a cost of R100 000, and the cost of capital for each project is 12%. Depreciation on each project is estimated at R25 000 per year. The projects’ expected net profit (loss) are as follows: Year 1 2 3 4 Required: Project 02AD R40 000 R5 000 R5 000 (R15 000) Project 02ZT R10 000 R10 000 R10 000 R10 000 1. Calculate the payback period for each project. 2. Calculate the net present value for each project. 3. Determine which project should be chosen (Based on 2 above). 4. Calculate the internal rate of return for project 02ZT.
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: Project S -$1,000 $899.96 $240 $15 $5 Project L -$1,000 $10 $250 $380 $843.66 The company's WACC is 10.0%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places.
TWITTERCO has an opportunity to invest in two business initiatives: MUSK #3 & MUSK #4 Expected cash flow data for these two projects is shown below: M #3 M #4 -250 90 90 90 90 2022 2023 2024 2025 2026 -250 105 105 105 TwitterCo has a cost of capital for these projects of 14%. Calculate the NPV of these projects. Project M#3 NPV: Project M#4 NPV: Based on NPV, preferred is: If both projects can be undertaken, should they?
6. A company has 2 mutually exclusive projects to consider with the following information: Project A R120,000 Project B R100,000 R50,000 R40,000 R70,000 R40,000 R40,000 R40,000 Initial investment Incremental cash flow Year 1 Incremental cash flow Year 2 Incremental cash flow Year 3 Incremental cash flow Year 4 WACC = 12% a) What is the NPV of each project? b) Which project should the company choose? c) If Project A can be repeated, which project should the company proceed with?

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