Question

Bruin, Inc., has identified the following two mutually exclusive projects: |

Year | Cash Flow (A) | Cash Flow (B) |

0 | –$37,000 | –$37,000 |

1 | 19,000 | 6,000 |

2 | 14,500 | 12,500 |

3 | 12,000 | 19,000 |

4 | 9,000 | 23,000 |

a. What is the IRR for Project A? |

b. What is the IRR for Project B? |

c. If the required return is 11 percent, what
is the NPV for Project A? |

d. If the required return is 11 percent, what
is the NPV for Project B? |

e. At what discount rate would the company be
indifferent between these two projects? |

Answer #1

Mahjong, Inc., has identified
the following two mutually exclusive projects:
Year
Cash Flow
(A)
Cash Flow
(B)
0
–$37,300
–$37,300
1
19,660
7,180
2
15,170
13,680
3
12,660
20,160
4
9,660
24,160
Required:
(a)
What is the IRR for Project
A?
(b)
What is the IRR for Project
B?
(c)
If the required return is 11
percent, what is the NPV for Project A?
(d)
If the required...

Garage, Inc., has identified the
following two mutually exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
–$
28,000
–$
28,000
1
13,400
3,800
2
11,300
9,300
3
8,700
14,200
4
4,600
15,800
a-1
What is the IRR for each of these projects? (Do not
round intermediate calculations. Enter your answers as a percent
rounded to 2 decimal places, e.g., 32.16.)
IRR
Project A
%
Project B
%
a-2
Using the IRR decision rule, which...

Piercy, LLC, has identified the following two mutually exclusive
projects:
Year
Cash Flow (A)
Cash Flow (B)
0
−$77,500
−$77,500
1
43,000
21,500
2
29,000
28,000
3
23,000
34,000
4
21,000
41,000
Over what range of discount rates would you choose Project A?
Project B? At what discount rate would you be indifferent between
these two projects? Explain.

1.The Hyatt Group Inc., has identified the following two
mutually exclusive projects:
Cash
Flows Cash
Flows
Year Project
A Project
B
0 -$10,000 _$10,000
1 200 5,000
2 500 6,000
3 8,200 500
4 4,800 500
What is the IRR of each of these projects? If you
apply the IRR decision rule, which project should the company
accept? Is this decision necessarily correct?
If the required rate of return is 9 percent, what is the NPV of
each of the projects? Which project will you choose if
you apply the NPV decision rule?
Over what range...

Homework - Capital Budgeting
1.The Hyatt Group Inc., has identified the following two
mutually exclusive projects:
Cash FlowsCash Flows
YearProject AProject B
0-$10,000_$10,000
1 200 5,000
2 500 6,000
3 8,200 500
4 4,800 500
a. What is the IRR of each of these projects? If you apply the
IRR decision rule, which project should the company accept? Is this
decision necessarily correct?
b. If the required rate of return is 9 percent, what is the
NPV of each of...

ZZY, LLC, has identified the following two mutually exclusive
projects:
Year
Cash Flow for A in
$
Cash Flow for B in
$
0
-65,000
-65,000
1
34,000
19,000
2
27,000
25,000
3
21,000
29,000
4
17,000
34,000
Below what discount rate is B the better project than A? (Hint:
You need to find the crossover rate). Answer in percent to two
decimals.

You are considering the following two
mutually exclusive projects with the following cash flows:
Project
A
Project B
Year Cash
Flow
Year Cash Flow
0
-$75,000
0 -$70,000
1
$19,000
1 $10,000
2
$48,000
2 $16,000
3
$12,000
3 $72,000
Required rate of
return
10
%
13 %
Calculate the NPV, IRR,...

Garage, Inc., has identified the following two projects:
Year
Cash flow (A)
Cash flow(B)
0
-$29,000
-$29,000
1
14,400
4,300
2
12,300
9,800
3
9,200
15,200
4
5,100
16,800
A and B are independent projects. Assume that the required rate
of return is 11 percent.
1. What is Project B's NPV?
2. A and B are independent projects. Assume that the required
rate of return is 11 percent.
Which project(s) should be accepted according to the NPV
criterion?
3. A...

Garage, Inc., has identified the following two mutually
exclusive projects:
Year
Cashflow A $
Cashflow B $
0
-29000
-29000
1
14400
4300
2
12300
9800
3
9200
15200
4
5100
16800
Requirements:
Using the IRR decision rule, which project should the company
accept? Is this decision necessarily correct?
If the required return is 12 percent, which project will the
company choose if it applies the NPV decision rule?

Consider the following two mutually exclusive projects:
Year Cash Flow (Project I) Cash Flow (Project II) 0 -$12,300
-$44,000 1 $1,800 $14,000 2 $6,000 $30,000 3 $2,000 $5,000 4 $5,000
$10,000 5 $7,000 $5,000
The required return is 10% for both projects. Assume that the
internal rate of return (IRR) of Project I and Project II is 18%
and 15%, respectively.
a) Which project will you choose if you apply the NPV criterion?
Why?
b) Which project will you choose...

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