PRINCIPLES OF CORPORATE FINANCE
13th Edition
ISBN: 9781264052059
Author: BREALEY
Publisher: MCG
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Textbook Question
Chapter 5, Problem 14PS
Investment criteria Consider the following two projects:
- a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)?
- b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11%.
- c. Which one would you choose if the cost of capital is 16%?
- d. What is the payback period of each project?
- e. Is the project with the shortest payback period also the one with the highest
NPV ? - f. What are the
internal rates of return on the two projects? - g. Does the IRR rule in this case give the same answer as NPV?
- h. If the opportunity cost of capital is 11%, what is the profitability index for each project? Is the project with the highest profitability index also the one with the highest NPV? Which measure should you use to choose between the projects?
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Chapter 5 Solutions
PRINCIPLES OF CORPORATE FINANCE
Ch. 5 - (IRR) Check the IRRs for project F in Section 5-3.Ch. 5 - (IRR) What is the IRR of a project with the...Ch. 5 - (XIRR) What is the IRR of a project with the...Ch. 5 - Payback a. What is the payback period on each of...Ch. 5 - Payback Consider the following projects: a. If the...Ch. 5 - Prob. 3PSCh. 5 - IRR Write down the equation defining a projects...Ch. 5 - Prob. 5PSCh. 5 - IRR Calculate the IRR (or IRRs) for the following...Ch. 5 - IRR rule You have the chance to participate in a...
Ch. 5 - IRR rule Consider a project with the following...Ch. 5 - IRR rule Consider projects Alpha and Beta: The...Ch. 5 - IRR rule Consider the following two mutually...Ch. 5 - IRR rule Mr. Cyrus Clops, the president of Giant...Ch. 5 - Prob. 12PSCh. 5 - Investment criteria Consider the following two...Ch. 5 - Profitability index Look again at projects D and E...Ch. 5 - Capital rationing Suppose you have the following...Ch. 5 - Prob. 17PSCh. 5 - Prob. 18PS
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