Your boss has asked you to evaluate a project with the following cash flows: Year 0 1 2 Cash flow 100 100 -250 The discount rate that is applicable to the project is 10% The project should be undertaken since the IRR > 10% The project should be rejected since the IRR > 10% The project should be undertaken since the IRR -10% The project should be rejected since the IRR - 10%

Your boss has asked you to evaluate a project with the following cash flows: Year 0 1 2 Cash flow 100 100 -250 The discount rate that is applicable to the project is 10% The project should be undertaken since the IRR > 10% The project should be rejected since the IRR > 10% The project should be undertaken since the IRR -10% The project should be rejected since the IRR - 10%

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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Similar questions

5. A firm evaluates all of its projects by applying the NPV rule. A project under consideration has the following cash flows: Year 0 1 2 3 Cash flow $ -34,000 16,000 18,000 15,000 If the required return is 12 percent, what is the NPV for this project? Should the firm accept the project? Explain. What is the NPV for this project if the required return is 35 percent? Should the firm accept the project? Explain. Round your answer to 2 decimal places.
You are considering a project that has the following cash flow data. What is the project's payback? (Ch. 11) Year 0 1 2 3 Cash Flow -900 350 450 600 Group of answer choices 1.95 1.52 2.60 2.17 2.38
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
Please solve step by step for clarity, thank you!
The NPV and payback period What information does the payback period provide? Suppose ABC Telecom Inc.’s CFO is evaluating a project with the following cash inflows. She does not know the project’s initial cost; however, she does know that the project’s regular payback period is 2.5 years. Year Cash Flow Year 1 $350,000 Year 2 $500,000 Year 3 $500,000 Year 4 $400,000 If the project’s weighted average cost of capital (WACC) is 10%, what is its NPV? $280,268 $224,214 $252,241 $322,308 Which of the following statements indicate a disadvantage of using the discounted payback period for capital budgeting decisions? Check all that apply. The discounted payback period does not take the project’s entire life into account. The discounted payback period is calculated using net income instead of cash flows. The discounted payback period does not take the time value of money into account.
Consider the cash flows for projects Alpha and Beta as follows: Project Alpha Beta Required: (a) (b) Year 0 cash flow -$250 - $150 Year 1 cash flow 0 Year 2 cash flow 400 200 0 Determine the discount rate that will make the NPV of the two projects equal. (Ignore negative discount rates.) Determine the range of discount rates in which project Alpha is preferred to project Beta.
Consider the following projects: Year 0 Year 1 Year 2 Year 3 Year 4 Discount Rate Cash Flow A -100 30 20 40 B -73 25 20 20 C -27 10 9 9 13= 60 14.50% 45 15.00% 11 14.00% a. Find the NPV of the projects, will you accept/reject them? b. What is the IRR of the projects, will you accept/reject? c. If the firm had $250 to invest today, what project(s) should it pursue? d. If the firm only had $100 to invest today, what project(s) should it pursue?
A project has the following cash flows: C * 0 = - 100000; C 1 = 50000 C * 2 = 150000 C 3 = 100000 . If the discount rate changes from 12 percent to 15 percent, what is the CHANGE in the NPV of the project ( approximately)? Multiple Choice 12,750 increase 12,750 decrease 14,240 increase 14,240 decrease
A small company wants to invest in Project A or B. The cash flows for both are shown below. Determine the payback period for each project assuming a MARR of 5% and suggest which project should be selected based on discounted payback period analysis.
Fernando Designs is considering a project that has the following cash flow and WACC data. What is the project's discounted payback? WACC: 10.75% Year 0 1 2 3 Cash flows - $800 $510 $510 $510 a. 2.18 years b. 1.10 years c. 2.82 years d. 1.82 years e. 1.18 years
Porter Company is analyzing two potential Investments. Project X $ 97,090 Initial investment Net cash flow: Year 1 Year 2 Year 3 Year 4 Multiple Choice If the company is using the payback period method, and it requires a payback of three years or less, which project(s) should be selected? O 32,500 32,500 32,500 0 Both X and Y are acceptable projects. O Project Y. Project Y $ 77,000 Project Y because it has a lower Initial Investment. Project X 5,700 34,500 34,500 25,000 Neither X nor Y is an acceptable project.
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