Question

Project S costs $13,000 and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L costs $34,500 and its expected cash flows would be $11,100 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, since the NPVS > NPVL. b. Both Projects S and L, since both projects have NPV's > 0. c. Both Projects S and L, since both projects have IRR's > 0. d. Project L, since the NPVL > NPVS. e. Neither Project S nor L, since each project's NPV < 0.

Answer #1

NPV = Present value of future cash inflows - present value of cash outflows

NPV of project S = -13000 + 5000 / ( 1 + 0.15)^{1} +
5000 / ( 1 + 0.15)^{2} + 5000 / ( 1 + 0.15)^{3} +
5000 / ( 1 + 0.15)^{4} + 5000 / ( 1 + 0.15)^{5}

NPV of project S = $3,760.8

IRR of project S using a financial calculator = 26.6%

Keys to use in a finacial calculator: CF0 = -13,000, C1 = 5000, F1 = 5, CPT, IRR)

NPV of project L = -34,500 + 11,100 / ( 1 + 0.15)^{1} +
11,100 / ( 1 + 0.15)^{2} + 11,100 / ( 1 + 0.15)^{3}
+ 11,100 / ( 1 + 0.15)^{4} + 11,100 / ( 1 +
0.15)^{5}

NPV of project L = $2,708.9

IRR of project L using a financial calculator = 18.27%

Keys to use in a finacial calculator: CF0 = -34500, C1 = 11100, F1 = 5, CPT, IRR)

**Since these are mutually exclusive projects, we select
project S, since NPVS > NPVL**

Project S costs $13,000 and its expected cash flows would be
$7,000 per year for 5 years. Mutually exclusive Project L costs
$41,500 and its expected cash flows would be $10,500 per year for 5
years. If both projects have a WACC of 14%, which project would you
recommend?
Select the correct answer.
a. Both Projects S and L, since both projects have IRR's >
0.
b. Project S, since the NPVS >
NPVL.
c. Both Projects S and L,...

Project S costs $19,000 and its expected cash flows would be
$6,500 per year for 5 years. Mutually exclusive Project L costs
$32,000 and its expected cash flows would be $8,850 per year for 5
years. If both projects have a WACC of 13%, which project would you
recommend? Select the correct answer.
a. Project L, since the NPVL > NPVS.
b. Both Projects S and L, since both projects have NPV's >
0
. c. Both Projects S and...

Project S costs $12,000 and its expected cash flows would be
$5,500 per year for 5 years. Mutually exclusive Project L costs
$26,000 and its expected cash flows would be $11,500 per year for 5
years. If both projects have a WACC of 14%, which project would you
recommend?
Select the correct answer.
a. Both Projects S and L, since both projects have NPV's >
0.
b. Project S, since the NPVS >
NPVL.
c. Neither Project S nor L,...

Project S costs $14,000 and its expected cash flows would be
$6,500 per year for 5 years. Mutually exclusive Project L costs
$37,500 and its expected cash flows would be $14,700 per year for 5
years. If both projects have a WACC of 13%, which project would you
recommend?
a. Project L, since the NPVL >
NPVS.
b. Both Projects S and L, since both projects have NPV's >
0.
c. Neither Project S nor L, since each project's NPV...

Project S costs $19,000 and its expected cash flows would be
$6,000 per year for 5 years. Mutually exclusive Project L costs
$38,500 and its expected cash flows would be $14,700 per year for 5
years. If both projects have a WACC of 16%, which project would you
recommend? Select the correct answer. a. Project S, since the NPVS
> NPVL. b. Project L, since the NPVL > NPVS. c. Both Projects
S and L, since both projects have IRR's...

Project S costs $18,000 and its expected cash flows would be
$7,000 per year for 5 years. Mutually exclusive Project L costs
$35,000 and its expected cash flows would be $8,400 per year for 5
years. If both projects have a WACC of 12%, which project would you
recommend? Select the correct answer. a. Project S, since the NPVS
> NPVL. b. Neither Project S nor L, since each project's NPV
< 0. c. Both Projects S and L, since...

Project S costs $11,000 and its expected cash flows would be
$7,000 per year for 5 years. Mutually exclusive Project L costs
$38,000 and its expected cash flows would be $13,300 per year for 5
years. If both projects have a WACC of 12%, which project would you
recommend?
Select the correct answer.
a. Project L, since the NPVL >
NPVS.
b. Neither Project S nor L, since each project's NPV <
0.
c. Both Projects S and L, since...

Project S costs $15,000 and its expected cash flows would be
$4,000 per year for 5 years. Mutually exclusive Project L costs
$36,000 and its expected cash flows would be $13,400 per year for 5
years. If both projects have a WACC of 16%, which project would you
recommend?
Select the correct answer.
I. Project L, since the NPVL >
NPVS.
II. Project S, since the NPVS >
NPVL.
III. Neither S or L, since each project's NPV < 0....

Project S costs $16,000 and its expected cash flows would be
$4,000 per year for 5 years. Mutually exclusive Project L costs
$29,500 and its expected cash flows would be $9,300 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, since each project's NPV <
0.
b. Both Projects S and L, since both projects have IRR's >
0.
c. Project...

CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE
PROJECTS
Project S costs $15,000 and its expected cash flows would be
$6,500 per year for 5 years. Mutually exclusive Project L costs
$45,000 and its expected cash flows would be $9,900 per year for 5
years. If both projects have a WACC of 16%, which project would you
recommend?
Select the correct answer.
a. Project S, since the
NPVS > NPVL.
b. Both Projects S and L, since
both projects have NPV's > 0....

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 6 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 12 minutes ago

asked 13 minutes ago

asked 15 minutes ago

asked 15 minutes ago

asked 18 minutes ago

asked 20 minutes ago

asked 34 minutes ago

asked 35 minutes ago

asked 35 minutes ago