You are considering the following two projects and can take only one. Your cost of capital is 10.7%. The cash flows for the two projects are as follows ($ million) a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of capital are you indifferent between the two projects? d. What should you do? a. What is the IRR of each project? The IRR for project A is %. (Round to one decimal place.) Data table D (Click on the following icon in order to copy its contents into a spreadsheet) Project A Year 0 -$100 B -$100 Year 1 $22 $49 Year 2 $31 $39 Print Done Year 3 Year 4 $39 $49 $31 $21 -

You are considering the following two projects and can take only one. Your cost of capital is 10.7%. The cash flows for the two projects are as follows ($ million) a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of capital are you indifferent between the two projects? d. What should you do? a. What is the IRR of each project? The IRR for project A is %. (Round to one decimal place.) Data table D (Click on the following icon in order to copy its contents into a spreadsheet) Project A Year 0 -$100 B -$100 Year 1 $22 $49 Year 2 $31 $39 Print Done Year 3 Year 4 $39 $49 $31 $21 -

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

See similar textbooks

Similar questions

Consider the cash flows for the investment projects given in Table. Assume that the MARR = 10%. (a) Suppose A, B, and C are mutually exclusive projects. Which project would be selected on the basis of the IRR criterion? (b) Assume that projects C and E are mutually exclusive. Using the IRR criterion, which Project would you select?. Net Cash Flow B D. E -4,850 2,100 2,100 2,500 4,250 3,200 2,850 800 300 4,250 4,250 2,850 2,900 1,050 500 -835 -835 -835 -835 1,500 3.250 1,600 1,200 2,100 2,100
You are choosing between two projects. The cash flows for the projects are given in the following table ($ million): - a. What are the IRRs of the two projects? b. If your discount rate is 5.1%, what are the NPVs of the two projects? c. Why do IRR and NPV rank the two projects differently? a. What are the IRRs of the two projects? The IRR for project A is%. (Round to one decimal place.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Project Year 0 Year 1 Year 2 A - $49 $23 $19 B - $101 $19 $40 Print Done Year 3 $18 $49 Year 4 $14 $62 X
Consider two projects, T and F, which are mutually exclusive, have unequal lives, and are repeatable. Their cash flows are depicted in the table below: Project Year O Year 1 Year 2 Year 3 Year 4 T -$105 million $62 million $62 million F -$105 million $33 million $33 million $33 million $33 million Assuming a WACC of 7.5%, use the replacement chain approach (RCA) to compare the projects and pick the better choice, given repetition. Note that the investment in project T rises by 7% when repeated, but the other cash flows stay the same. Project T is better as its NPV is higher by $89,657 O Project F is better as its NPV is higher by $89,657 O Project T is better as its NPV is higher by $797,274 O Project F is preferable without repetition, and T is preferable with repetition O Project F is better as its NPV is higher by $797,274
You are considering a project X which has cash flows given below: Year 0 Year 1 Year 2 Project X ($7,000) $40,000 ($40,000) Project X has two IRRs, and its cost of capital is 15%. Which of the following statements best describes Project X? (Hint: draw NPV profile) Group of answer choices No matter what its cost of capital is, it should be accepted. No matter what its cost of capital is, it should be rejected. If the cost of capital would be between the two IRRs, it could be accepted. Since both IRRs are greater than its cost of capital, it should be accepted. All of these statements are not consistent with Project X.
Southland Inc is considering a project that results in the following after-tax cash flows: t = 0: -292, t = 1: 250, t = 2: 150, and t = 3: 109. What would be the NPV of this project for southland Inc, if they discount future cash flows at a 6.9% rate?
Consider the following two investment alternatives: The firm's MARR is known to be 15%.(a) Compute the IRR of Project B.(b) Compute the PW of Project A. (c) Suppose that Projects A and B are mutually exclusive. Using the IRR, whichproject would you select?
10. An engineer is comparing three projects with the Incremental ROR method. There are revenue forecasts and cost cash flows. He uses Excel's IRR function to determine the ROR value for each project. Alternative A is 3.5% above MARR, Alternative B is 1.2% below MARR, and Alternative C = 2.4% above MARR. Which alternatives should be included in the incremental ROR analysis? A. He must include alternatives A and C in the Incremental analysis B. He must include alternatives A and B in the Incremental analysis C. He must include alternatives B and C in the Incremental analysis D. Only alternative A should be included in the incremental analysis Please solve max only answer option ASAP in 10 minutes
7. Consider two investments A and B with the sequences of cash flows given in the table below. 12 Click the icon to view the cash flows for the projects. (a) Compute the IRR for each investment. The rate of return for Project A is %. (Round to one decimal place.) The rate of return for Project B is %. (Round to one decimal place.) (b) At MARR = 15%, determine the acceptability of each project. Would you accept Project A? Choose the correct answer below. Yes O No Would you accept Project B? Choose the correct answer below. Yes No (c) If A and B are mutually exclusive projects, which project would you select based on the rate of return on incremental investment at MARR = 15%? The rate of return on the incremental investment is %. (Round to one decimal place.) Which project would you select based on the rate of return on incremental investment at MARR = 15%? Choose the correct answer below. O Project B Project A 12: More Info Net Cash Flow Project A Project B - $125,000 - $110,000 30,000…
Consider a project that will produce sales of $55,150 and have costs of $31,100. Taxes will be $5,400 and the depreciation expense will be $3,325. An initial cash outlay of $2,250 is required for net working capital. What is the project's operating cash flow?
不 Data table You are choosing between two projects. The cash flows for the projects are given in the following table ($ million): a. What are the IRRS of the two projects? b. If your discount rate is 4.6% what are the NPVS of the two projects? c. Why do IRR and NPV rank the two projects differently? a. What are the IRRS of the two projects? The IRR for project A is ☐ %. (Round to one decimal place.) (Click on the following icon in order to copy its contents into a spreadsheet.) Project A Year 0 - $49 Year 1 $24 B - $99 $18 Year 2 $21 $40 Print Done Year 3 Year 4 $19 $14 $50 $61
Compute the payback statistic for Project Y and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 11 percent and the maximum allowable payback is one year. Time: 0 1 2 3 4 5 Cash flow: −100 75 100 300 75 200
Use the table for the question(s) below. Consider the following list of projects: Project Investment NPV A $135,000 $6,000 200,000 30,000 20,000 C 125,000 D 150,000 2,000 E 175,000 10,000 75,000 80,000 10,000 G 9,000 200,000 20,000 50,000 4,000 Assume that your capital is constrained, so that you only have $600,000 available to invest in projects. If you invest in the optimal combination of projects given your capital constraint, then the total net present value (NPV) for all the projects you invest in will be closest to O A. $69,000 2021 O B. $80,000 OC. $65,000 O D. $111,000 Scre 2021-12. Next O ctv w MacBook Air DII DD 80 O00 D00 F9 F10 F8 F7 F6 esc F4 F5 F2 F3 F1 * @ 23 2$ 7 8. 9 1 3 4 O O 0 0

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS