Bundle: Fundamentals of Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
14th Edition
ISBN: 9781305777118
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 11, Problem 11P
CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS Project S costs $15,000, and its expected cash flows would be $4,500 per year for 5 years. Mutually exclusive Project L costs $37,500, and its expected cash flow’s would be $11,100 per year for 5 years. If both projects have a WACC of 14%, which project would you recommend? Explain.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Project S requires an initial outlay at t = 0 of $16,000, and its expected cash flows would be $5,000 per year for 5
years. Mutually exclusive Project L requires an initial outlay at t = 0 of $30,500, and its expected cash flows would be
$9,450 per year for 5 years. If both projects have a WACC of 16%, which project would you recommend?
Select the correct answer.
O a. Project S, because the NPVS > NPVL.
O b. Both Projects S and L, because both projects have NPV's > 0.
c. Both Projects S and L, because both projects have IRR's > 0.
O d. Project L, because the NPVL > NPVS.
O e. Neither Project S nor L, because each project's NPV < 0.
Project S requires an initial outlay at t = 0 of $10,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $41,500, and its expected cash flows would be $10, 950 per year for 5 years. If both projects have a WACC of 15%, which project would you recommend?
Select the correct answer.
a. Project S, because the NPVS > NPVL.
b. Project L, because the NPVL > NPVS.
c. Neither Project S nor L, because each project's NPV < 0.
d. Both Projects S and L, because both projects have NPV's > 0.
e. Both Projects S and L, because both projects have IRR's > 0.
Give typing answer with explanation and conclusion
Project S requires an initial outlay at t = 0 of $13,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $28,000, and its expected cash flows would be $13,850 per year for 5 years. If both projects have a WACC of 15%, which project would you recommend?
Select the correct answer.
a. Neither Project S nor L, because each project's NPV < 0.
b. Both Projects S and L, because both projects have NPV's > 0.
c. Project S, because the NPVS > NPVL.
d. Both Projects S and L, because both projects have IRR's > 0.
e. Project L, because the NPVL > NPVS.
Chapter 11 Solutions
Bundle: Fundamentals of Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
Ch. 11 - How are project classifications used in the...Ch. 11 - Prob. 2QCh. 11 - Why is the NFV of a relatively long-term project...Ch. 11 - Prob. 4QCh. 11 - If two mutually exclusive projects were being...Ch. 11 - Discuss the following statement: If a firm has...Ch. 11 - Why might it be rational for a small firm that...Ch. 11 - Project X is very risky and has an NPV of 3...Ch. 11 - Prob. 9QCh. 11 - A firm has a 100 million capital budget. It is...
Ch. 11 - NPV Project K costs 52,125, its expected cash...Ch. 11 - IRR Refer to Problem 11-1. What is the projects...Ch. 11 - MIRR Refer to Problem 11-1. What is the projects...Ch. 11 - Prob. 4PCh. 11 - Prob. 5PCh. 11 - NPV Your division is considering two projects with...Ch. 11 - CAPITAL BUDGETING CRITERIA A firm with a 14% VVACC...Ch. 11 - Prob. 8PCh. 11 - Prob. 9PCh. 11 - Prob. 10PCh. 11 - CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE...Ch. 11 - IRR AND NPV A company is analyzing two mutually...Ch. 11 - MIRR A firm is considering two mutually exclusive...Ch. 11 - CHOOSING MANDATORY PROJECTS ON THE BASIS OF LEAST...Ch. 11 - NPV PROFILES: TIMING DIFFERENCES An oil-drilling...Ch. 11 - Prob. 16PCh. 11 - NPV AND IRR A store has 5 years remaining on its...Ch. 11 - Prob. 19PCh. 11 - NPV A project has annual cash flows of 7,500 for...Ch. 11 - MIRR Project X costs 1,000, and its cash flows arc...Ch. 11 - MIRR A project has the following cash flows: This...Ch. 11 - CAPITAL BUDGETING CRITERIA Your division is...Ch. 11 - BASICS OF CAPITAL BUDGETING You recently went to...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4 and 5, and $2,000 for years 6 through 10. What is the payback period for this project?arrow_forwardProject S requires an initial outlay at t= 0 of $16,000, and its expected cash flows would be $5,500 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t= 0 of $27,500, and its expected cash flows would be $10,150 per year for 5 years. If both projects have a WACC of 14%, which project would you recommend? Select the correct answer. Ca. Project S, because the NPVs > NPVL. Ob. Both Projects S and L, because both projects have IRR's > 0. Oc. Both Projects S and L, because both projects have NPV's > 0. Od. Project I because the NPVL > NPVs. Oe. Neither Project S nor L, because each project's NPV < 0.arrow_forwardProject S requires an initial outlay at t=0 of $12,000, and its expected cash flows would be $4,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $38,500, and its expected cash flows would be $9,200 per year for 5 years. If both projects have a WACC of 15%, which project would you recommend? Select the correct answer. Oa. Both Projects S and L, because both projects have NPV's > 0. Ob. Project S, because the NPVs > NPVL Oc. Both Projects S and L, because both projects have IRR's > 0. Od. Neither Project S nor L, because each project's NPV NPVs.arrow_forward
- 9. Project S requires an initial outlay at t = 0 of $19,000, and its expected cash flows would be $4,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $28,000, and its expected cash flows would be $12,150 per year for 5 years. If both projects have a WACC of 13%, which project would you recommend? Select the correct answer. a. Project S, because the NPVS > NPVL. b. Neither Project S nor L, because each project's NPV < 0. c. Both Projects S and L, because both projects have IRR's > 0. d. Both Projects S and L, because both projects have NPV's > 0. e. Project L, because the NPVL > NPVS. 10arrow_forwardProject Q requires an initial outlay at t = 0 of $20,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $26,000, and its expected cash flows would be $13,600 per year for 5 years. If both projects have a WACC of 16%, which project would you recommend? Select the correct answer. a. Neither Project S nor L, since each project's NPV < 0. b. Project S, since the NPVS > NPVL. c. Project L, since the NPVL > NPVS. d. Both Projects S and L, since both projects have IRR's > 0. e. Both Projects S and L, since both projects have NPV's > 0.arrow_forwardProject S requires an initial outlay at t = 0 of $14,000, and its expected cash flows would be $6,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $26,500, and its expected cash flows would be $7,600 per year for 5 years. If both projects have a WACC of 14%, which project would you recommend? Select the correct answer. a. Neither Project S nor L, because each project's NPV < 0. b. Both Projects S and L, because both projects have NPV's > 0. c. Project S, because the NPVS > NPVL. d. Both Projects S and L, because both projects have IRR's > 0. e. Project L, because the NPVL > NPVS.arrow_forward
- Project GS costs $15,000, and its expected cash flows would be $4,500 per year for 5 years. Mutually Exclusive project LL costs $37,500, and its expected cash flows would be $11,100 per year for 5 years. If both projects have a WACC of 14%, which project would you recommend?arrow_forwardProject S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?arrow_forwardA project has an initial cost of $40,000, expected net cash inflows of $9,000 per year for 7 years, and a cost of capital of 11%. Requirements: What is the project’s NPV? What is the project’s IRR? What is the project’s PI? What is the project’s payback period? What is the project’s discounted payback period?arrow_forward
- Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 410,000 –$ 68,000 1 66,000 30,000 2 86,000 28,000 3 71,000 25,500 4 446,000 20,600 1) Whichever project you choose, if any, you require a 15% return on your investment. What is the payback period for each project? What is the discounted payback period for each project? What is the NPV for each project? What is the IRR for each project? What is the profitability index for each project? I only have one question left so I would really appreciate it if you could help with all the questions thanks.arrow_forwardConsider a project in which the initial after-tax investment is $80,000. The predicted after-tax cash flow for the following 4 years are: Year 1: $25,000 Year 2: $25,000 Year 3: $35,000 Year 4: $45,000 Year 5: $55,000 What is the IRR of this project? Group of answer choices 30.29% 29.32% 24.54% 27.98% 24.14%arrow_forwardA project has an initial cost of $60,000, expected net cash inflows of $13,000 per year for 7 years, and a cost of capital of 10%. What is the project’s NPV? Blank 1 What is the project’s IRR? Blank 2 What is the project’s MIRR? Blank 3 What is the project’s payback period? Blank 4 What is the project’s discounted payback period? Blank 5arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License