Question

Consider the following cash flows of two mutually exclusive projects for Tokyo Rubber Company. Assume the discount rate for both projects is 12 percent. |

Year | Dry Prepreg | Solvent Prepreg | ||||

0 | –$ | 1,800,000 | –$ | 800,000 | ||

1 | 1,110,000 | 425,000 | ||||

2 | 920,000 | 700,000 | ||||

3 | 760,000 | 410,000 | ||||

a. |
What is the payback period for both projects? |

b. |
What is the NPV for both projects? |

c. |
What is the IRR for both projects? |

d. |
Calculate the incremental IRR for the cash flows. |

Answer #1

Consider the following cash flows of two mutually exclusive
projects for Tokyo Rubber Company. Assume the discount rate for
both projects is 11 percent.
Year
Dry Prepreg
Solvent Prepreg
0
–$
1,740,000
–$
770,000
1
1,104,000
395,000
2
908,000
640,000
3
754,000
398,000
a.
What is the payback period for both projects? (Do not
round intermediate calculations. Round your answers to 2 decimal
places, e.g., 32.16.)
b.
What is the NPV for both projects? (Do not round
intermediate...

Consider the following cash flows on two mutually exclusive
projects for the Bahamas Recreation Corporation (BRC). Both
projects require an annual return of 16 percent.
Year Deepwater New Sub Ride
0 −$ 995,000 −$ 1,940,000
1 415,000 990,000
2 546,000 845,000
3 465,000 840,000
a-1. Compute the IRR for both projects. (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places, e.g., 32.16.)
IRR Deepwater Fishing _____ % Submarine Ride _______ %
Calculate the...

Consider the following cash flows on two mutually exclusive
projects for the Bahamas Recreation Corporation (BRC). Both
projects require an annual return of 18 percent. Year Deepwater
Fishing New Submarine Ride 0 ?$ 1,035,000 ?$ 2,020,000 1 455,000
1,070,000 2 578,000 885,000 3 505,000 920,000 a-1. Compute the IRR
for both projects. (Do not round intermediate calculations. Enter
your answers as a percent rounded to 2 decimal places (e.g.,
32.16).) IRR Deepwater Fishing % Submarine Ride % a-2. Based on...

Consider the following cash flows of two mutually exclusive
projects for A–Z Motorcars. Assume the discount rate for both
projects is 12 percent. Year AZM Mini-SUV AZF Full-SUV 0 –$ 525,000
–$ 875,000 1 335,000 365,000 2 210,000 450,000 3 165,000 305,000 a.
What is the payback period for each project? (Do not round
intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.) Payback period AZM Mini-SUV years AZF
Full-SUV years b. What is the NPV for...

Consider the following cash flows on two mutually exclusive
projects for the Bahamas Recreation Corporation (BRC). Both
projects require an annual return of 18 percent. Year Deepwater
Fishing New Submarine Ride 0 ?$ 1,040,000 ?$ 2,030,000 1 460,000
1,080,000 2 582,000 890,000 3 510,000 930,000 a-1. Compute the IRR
for both projects. (Do not round intermediate calculations. Enter
your answers as a percent rounded to 2 decimal places (e.g.,
32.16).) IRR Deepwater Fishing % Submarine Ride % a-2. Based on...

Consider the following two
mutually exclusive projects:
Year
Cash Flow
(X)
Cash Flow
(Y)
0
–$
20,900
–$
20,900
1
9,075
10,550
2
9,550
8,025
3
9,025
8,925
Calculate the IRR for each project. (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 2 decimal places, e.g., 32.16.)
IRR
Project X
%
Project Y
%
What is the crossover rate for these two projects? (Do
not round intermediate calculations. Enter your answer...

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...

Consider the following cash flows of two mutually exclusive
projects for AZ-Motorcars. Assume the discount rate for both
projects is 11 percent.
Year
AZM
Mini-SUV
AZF
Full-SUV
0
–$
520,000
–$
870,000
1
334,000
364,000
2
208,000
448,000
3
164,000
304,000
a.
What is the payback period for each project? (Do not
round intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.)

Consider two mutually exclusive R&D projects that Savage
Tech is considering. Assume the discount rate for both projects is
13 percent.
Project A:
Server CPU .13 micron processing project
By shrinking the die size to .13 micron, the company will be
able to offer server CPU chips with lower power consumption and
heat generation, meaning faster CPUs.
Project B:
New telecom chip project
Entry into this industry will require introduction of a new
chip for cell phones. The know-how will...

Consider the following cash flows on two mutually exclusive
projects for the Bahamas Recreation Corporation (BRC). Both
projects require an annual return of 18 percent.
Year
Deepwater Fishing
New Submarine Ride
0
−$
1,030,000
−$
2,010,000
1
450,000
1,060,000
2
574,000
880,000
3
500,000
910,000
Compute the NPV for both projects. (Do not round
intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.)
c-2.
Based on the NPV, which project should you choose?
...

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