Question

Julia evaluated two independent projects using all the capital budgeting techniques mentioned in the book, and she concluded that both projects are acceptable. According to this information, which of the following statements is correct?

a. Each project has a discounted payback (DPB) that is greater than its useful life (n).

b. Both projects should be purchased.

c. Both projects have internal rates of return (IRRs) that are less than the firm's required rate of return (r).

d. One project has a positive net present value (NPV), whereas the other project has a negative NPV.

Answer #1

**b. Both projects should be purchased**

If projects are independent, and using all the techniques state that projects should be accepted, then both projects should be accepted. A project is accepted when IRR is greater than required rate of return. Therefore, both projects have IRR greater than required rate of return. Projects should be accepted when NPV is positive. Therefore, both projects have positive NPVs. Discounted payback will be lower than its useful life if the projects are to be accepted.

Tom just got out of a meeting with felicity in which they
discussed a capital budgeting project they are evaluating for the
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techniques mentioned in the book to evaluate the project and that
she concluded the project should be purchase. based on this
information, which of the following statements must be correct?
A. The projected...

A.TRUE FASLSE
1) 1. Capital Budgeting do not involve the allocation of funds
to project that have longer life duration.
YES OR NO
2)Long time period decision of capital budgeting is good or bad
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3)DPB is the Discounting technique of Capital Budgeting
YES OR NO
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inflow of Rs. 8000 for next 10 years. What is the Discounted
Payback period of the project if rate of interest is...

Tara is evaluating two mutually exclusive capital
budgeting projects that have the following characteristics:
Cash Flows
Year
Project Q
Project R
0
$(4,000)
$(4,000)
1
0
3,500
2
5,000
2,100
IRR
11.8%
28.40%
If the firm's required rate of return (r) is 10 percent, which
project should be purchased?
a.
Both projects should be purchased, because the IRRs for both
projects exceed the firm's required rate of return.
b.
Neither project should be accepted, because their NPVs are too
small...

Tara is evaluating two mutually exclusive capital
budgeting projects that have the following characteristics:
Cash Flows
Year
Project Q
Project R
0
$(4,000)
$(4,000)
1
0
3,500
2
5,000
2,100
IRR
11.8%
28.40%
If the firm's required rate of return (r) is 10 percent, which
project should be purchased?
a.
Both projects should be purchased, because the IRRs for both
projects exceed the firm's required rate of return.
b.
Neither project should be accepted, because their NPVs are too
small...

Which of the following is statements related to capital
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NPV is greater zero. A project whose NPV is greater than its IRR is
should be accepted. Both the NPV method and the IRR method of
evaluating capital investment projects are widely considered to be
superior to the payback method. An NPV of zero signifies that the
project's cash flows are just sufficient to repay the invested
capital and to...

Given the following cash flows, for the two independent
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Payback
Period
Accounting rate of
return
Net Present
Value
Profitability
index
And recommend acceptance or rejection of projects considering
individual techniques of capital budgeting. A rate of 10 % has been
selected for the NPV analysis.
Project A
Project B
Initial outlay
$50,000
$100,000
Cash inflows
Year 1
$10,000
$ 25,000
Year 2
15,000
25,000
Year 3
20,000
25,000
Year 4
25,000
25,000...

CAPITAL BUDGETING CRITERIA
A firm with a 14% WACC is evaluating two projects for this
year's capital budget. After-tax cash flows, including
depreciation, are as follows:
0
1
2
3
4
5
Project M
-$18,000
$6,000
$6,000
$6,000
$6,000
$6,000
Project N
-$54,000
$16,800
$16,800
$16,800
$16,800
$16,800
Calculate NPV for each project. Round your answers to the
nearest cent. Do not round your intermediate calculations.
Project M $
Project N $
Calculate IRR for each project. Round your answers to two...

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A firm with a 13% WACC is evaluating two projects for this
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depreciation, are as follows:
0
1
2
3
4
5
Project M
-$27,000
$9,000
$9,000
$9,000
$9,000
$9,000
Project N
-$81,000
$25,200
$25,200
$25,200
$25,200
$25,200
Calculate NPV for each project. Round your answers to the
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Project M $
Project N $
Calculate IRR for each project. Round your answers to two...

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11. You are considering two independent projects
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(b) You should reject both projects.
(c) You should accept project A and reject project B.
(d) You should accept project B and reject project A.
(e) None of the above is correct.
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