Your division is considering two projects. The discount rate is 10 percent, and the projects’ after- tax cash flows would be:Years 01234 Project A -$30 $5 $10 $15 $20 Project B -$30 $20 $10 $8 $6a. Calculate the projects’ NPVs and IRRs.b. If the two projects are independent, which project(s) should be chosen?c. If the two projects are mutually exclusive, which project should be chosen?d. Calculate the projects’ regular paybacks and discounted paybacks. Which project looksbetter when judged by the paybacks?e. What two pieces of information does the payback convey that are absent from the othercapital budgeting decision methods (NPV and IRR)?
Your division is considering two projects. The discount rate is 10 percent, and the projects’ after- tax cash flows would be:Years 01234 Project A -$30 $5 $10 $15 $20 Project B -$30 $20 $10 $8 $6a. Calculate the projects’ NPVs and IRRs.b. If the two projects are independent, which project(s) should be chosen?c. If the two projects are mutually exclusive, which project should be chosen?d. Calculate the projects’ regular paybacks and discounted paybacks. Which project looksbetter when judged by the paybacks?e. What two pieces of information does the payback convey that are absent from the othercapital budgeting decision methods (NPV and IRR)?
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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Your division is considering two projects. The discount rate is 10 percent, and the projects’ after- tax cash flows would be:
Years 01234 Project A -$30 $5 $10 $15 $20 Project B -$30 $20 $10 $8 $6
a. Calculate the projects’ NPVs and IRRs.
b. If the two projects are independent, which project(s) should be chosen?
c. If the two projects are mutually exclusive, which project should be chosen?
d. Calculate the projects’ regular paybacks and discounted paybacks. Which project looks
better when judged by the paybacks?
e. What two pieces of information does the payback convey that are absent from the other
capital budgeting decision methods (
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