Mindtapv2.0 Finance, 1 Term (6 Months) Printed Access Card For Brigham/houston's Fundamentals Of Financial Management, 15th (mindtap Course List)
15th Edition
ISBN: 9780357114575
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 11, Problem 12P
Summary Introduction
To calculate: The IRR of the better project.
Introduction:
It is a method under capital budgeting which includes the calculation of net present value of the project in which a company is investing. The calculation is done by calculating the difference between the value of
It refers to the rate of return that is computed by the company to make a decision regarding the selection of a project for investment. This rate provides the basis for selection of projects with lower cost of capital and rejection of project with higher cost of capital.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Project X
Initial investment (CF) $500,000
Year (1)
1
2
3
4
5
Project Y
$330,000
Cash inflows (CFt)
$130,000
$120,000
$130,000
$200,000
$240,000
$150,000
$130,000
$75,000
$80,000
$60,000
NPV and IRR analysis of projects Thomas Company is considering two mutually exclusive projects. The firm, which has a cost of capital of 10%, has estimated its
cash flows as shown in the following table:
a. Calculate the NPV of each project, and assess its acceptability.
b. Calculate the IRR for each project, and assess its acceptability.
a. The NPV of project A is $
(Round to the nearest cent.)
Enter your answer in the answer box and then click Check Answer.
7 parts
remaining
Clear All
Check Answer
10:3
5/11
Type here to search
Cup
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
Chapter 11 Solutions
Mindtapv2.0 Finance, 1 Term (6 Months) Printed Access Card For Brigham/houston's Fundamentals Of Financial Management, 15th (mindtap Course List)
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 L costs 65,000, 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 - DISCOUNTED PAYBACK Refer to problem 11-1. What is...Ch. 11 - NPV Your division is considering two projects with...Ch. 11 - CAPITAL BUDGETING CRITERIA A firm with a 14% WACC...Ch. 11 - Prob. 8PCh. 11 - CAPITAL BUDGETING CRITERIA: ETHICAL CONSIDERATIONS...Ch. 11 - CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE...Ch. 11 - CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE...Ch. 11 - Prob. 12PCh. 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 - CAPITAL BUDGETING CRITERIA A company has an 11%...Ch. 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 5,000 for...Ch. 11 - Prob. 21PCh. 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
- NPV and IRR analysis of projects Thomas Company is considering two mutually exclusive projects. The firm, which has a cost of capital of 9%, has estimated its cash flows as shown in the following table: a. Calculate the NPV of each project, and assess its acceptability. b. Calculate the IRR for each project, and assess its acceptability. Data table (Click on the icon here in order to copy the contents of the data table below - X into a spreadsheet.) a. The NPV of project A is $ (Round to the nearest cent.) Initial investment (CF) Project A $120,000 Project B $102,000 Year (t) Cash inflows (CF) 1 $25,000 $60,000 2 $30,000 $35,000 3 $30,000 $25,000 4 $55,000 $25,000 5 $55,000 $10,000arrow_forwardIRR-Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: 9. The firm's cost of capital is 14%. a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRS. b. Which project is preferred? a. The internal rate of return (IRR) of project X is %. (Round to two decimal places.) Data Table Is project X acceptable on the basis of IRR? (Select the best answer below.) No (Click on the icon located on the top-right corner of the data table below in order to Yes copy its contents into a spreadsheet.) Project X Initial investment (CF) $500,000 Project Y $300.000 The internal rate of return (IRR) of project Y is %. (Round to two decimal places.) Is project Y acceptable on the basis of IRR? (Select the best answer below.) Year (f) Cash inflows (CF,) 1 $110,000…arrow_forwardConsider 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 È are mutually exclusive. Using the IRR criterion, which Project would you select? Net Cash Flow A В C D E -4,250 3,200 2,850 -4,250 1,500 3,250 1,600 1,200 -4,250 2,850 -4,850 2,100 2,100 2,100 2,100 2,500 1 -835 2,900 1,050 500 2 -835 3 800 -835 4 300 -835arrow_forward
- IRR-Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: E The firm's cost of capital is 15%. a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRS. b. Which project is preferred? a. The internal rate of return (IRR) of project X is %. (Round to two decimal places.) Is project X acceptable on the basis of IRR? (Select the best answer below.) Yes No The internal rate of return (IRR) of project Y is %. (Round to two decimal places.) Is project Y acceptable on the basis of IRR? (Select the best answer below.) Yes 6 Data Table No b. Which project is preferred? (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) O A. Project Y Project X $500,000 Project Y $290,000 B. Neither…arrow_forwardIRR-Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: The firm's cost of capital is 13%. a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs. b. Which project is preferred? a. The internal rate of return (IRR) of project X is%. (Round to two decimal places.)arrow_forwardA Company is considering two mutually exclusive projects whose expected net cash flows are in the table below. The company's WACC is 15%. What is the NPV for Project Y? What is the NPV for Project Z? What is the IRR for Project Y? What is the IRR for Project Z? Which Project, if any, should you choose? Time Project Y Project Z 0 S (420.00) S(950.00) 1 S(572.00) $270.00 2 S(189.00) S270.00 3 S(130.00) $270.00 4 $1,300.00 $270.00 5 $720.00 $270.00 6 $980.00 $270.00 7 $(225.00) $270.00 Pleaseshow in excel I think im getting the wrong valuesarrow_forward
- Consider the following projects: Cash Flows ($) Co Project D E -11, 100 -21, 100 C₁ 22, 200 34,500 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 11%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose?arrow_forwardConsider the following projects: Cash Flows ($) Project D E CO00 C101 -11,700 23,400 -21,700 37,975 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 12%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose?arrow_forwardA Company is considering two mutually exclusive projects whose expected net cash flows are in the table below. The company's WACC is 15%. What is the NPV for Project Y? What is the NPV for Project Z? What is the IRR for Project Y? What is the IRR for Project Z? Which Project, if any, should you choose? Time Project Y Project Z 0 $(420.00) $(950.00) | $(572.00) $270.00 2 $(189.00) $270.00 3 $(130.00) $270.00 4 $1,300.00 $ 270.00 5 $720.00 $270.00 6 $980.00 $270.00 7 $(225.00) $270.00 Please show in excel I think im getting the wrong valuesarrow_forward
- A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 Project S Project L 1 % 2 3 -$1,000 $886.11 $260 $10 $5 $380 -$1,000 $10 $260 $805.42 The company's WACC is 10.5%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places. 4arrow_forwardOnly typingarrow_forwardPlaese image for question.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author: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 ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
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