You are considering an investment into a new market and have two mutually exclusive and normal cash flow projects, Xand Y, under consideration. Project X has an IRR of 11.5%, while project Y has an IRR of 13.2%. For a rate of return of 15.5%, the NPV of project X is equal to the NPV of project Y. If the required rate of return is 8.8%, which project should be chosen? Be sure to explain your reasoning. For the toolbar, press ALT+F10 (PC)) or ALT+FN+F10 (Mac). BIU s Paragraph Arial 14px 田由田国

You are considering an investment into a new market and have two mutually exclusive and normal cash flow projects, Xand Y, under consideration. Project X has an IRR of 11.5%, while project Y has an IRR of 13.2%. For a rate of return of 15.5%, the NPV of project X is equal to the NPV of project Y. If the required rate of return is 8.8%, which project should be chosen? Be sure to explain your reasoning. For the toolbar, press ALT+F10 (PC)) or ALT+FN+F10 (Mac). BIU s Paragraph Arial 14px 田由田国

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

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You are considering an investment in two normal cash flow and mutually exclusive projects. Project Apple has an internal rate of return of 13.6%, while Project Brewster has an internal rate of return of 15.75%. At a discount rate of 9.8% each project has the same net present value. If the appropriate weighted average cost of capital is 9.25%, which project(s), if any, should be adopted? Explain your decision.
The Collins Group, a leading producer of custom automobile accessories, has hired you to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below. Assets $ 38,000,000 101,000,000 $139,000,000 Current assets Net plant, property, and equipment Total assets Liabilities and Equity Accounts payable $ 10,000,000 9,000,000 $ 19,000,000 40,000,000 $ 59,000,000 Accruals Current liabilities Long-term debt (40,000 bonds, S1,000 par value) Total liabilities Common stock (10,000,000 shares) Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 30,000,000 _50,000,000 _80,000,000 $139,000,000 The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is…
If the cash flows for Project M are C0 = -1,000; C1 = +800; C2 = +700 and C3= -200. Calculate the IRR for the project. For what range of discount rates does the project have a positive NPV?
Consider the two mutually exclusive investment projects given in the table below for which MARR = 12%. On the basis of the IRR criterion, which project would be selected under an infinite planning horizon with project repeatability likely? Click the icon to view the cash flows for the investment projects. The rate of return on the incremental investment is 42.3 %. (Round to one decimal place.) Which project would be selected on the basis of the IRR criterion? Choose the correct answer below. Project B Project A More Info (Click on the following icon in order to copy its contents into a spreadsheet.) Net Cash Flow Project A - $4,000 n 0 1 2 3 IRR 2,500 4,000 4,000 62.18% Project B - $10,500 9,500 9,500 50.57% X
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Consider the following cash flows: C0= -22, C1= 20, C2= 20, C3=20, C4= -40 a) Calculate both the internal rates of return on this project out of which one is (a shade above) 7% and that the other is (a shade below) 34%. b) is the project attractive if the discount rate is 5%? What is the NPV? c) Is the project attractive is the discount rate is 20%? What is the NPV? d) Is the project attractive is the discount rate is 40%? What is the NPV?
Please see attached:
Calculate the payback period, net present value, and internal rate of return for Project A. Assume a discount rate of 10%. Should the firm accept or reject Project A? Explain. If Project A and Project B are mutually exclusive, which is the better choice? Explain. What are “non-conventional” cash flows? What issues arise when evaluating projects with “non-conventional” cash flows? Project A Project B Year Cash Flow Year Cash Flow 0 -$100,000 0 -$1 1 $70,000 1 $0 2 $0 2 $0 3 $50,000 3 $10
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3. You are considering a project that has an initial outlay of $1million. The profitability index of the project is 2.24. What is the NPV of the project?
Please answer all questions a,b and c with explanations. Should each discount be accepted or rejected. Thx
You are considering two similar but mutually exclusive investments. You have calculated that: Project A has an NPV = $7,600 and IRR = 19.80% Project B has an NPV = $11,200 and IRR = 17.30% Which project would you select? Project A O Project B