A corporation is
considering two mutually exclusive projects.
The projects have the
following cash flows:
Project...
A corporation is
considering two mutually exclusive projects.
The projects have the
following cash flows:
Project A
Project B
YEAR
0
<$10,000>
<$8,000>
1
1,000
7,000
2
2,000
1,000
3
6,000
1,000
4
6,000
1,000
At what cost of
capital do the two projects have the same net present value? (That
is, what is the crossover rate?)
TABLE 3
Project A
Project B
Time 0
-11,000
-10,000
Time 1
3,000
4,000
Time 2...
TABLE 3
Project A
Project B
Time 0
-11,000
-10,000
Time 1
3,000
4,000
Time 2
8,000
3,000
Time 3
3,000
10,000
"Consider the cash flow of the two projects depicted in Table 3.
If WiseGuy Inc. uses payback period rule to choose projects, which
of the projects (Project A or Project B) will rank highest?"
A) Project A
B) Project B
C) Project A and Project B have the same ranking.
D) Cannot calculate a payback period without a...
Section 5
Jean's Juice Company is considering an investment in a new juice
machine. The machine...
Section 5
Jean's Juice Company is considering an investment in a new juice
machine. The machine will cost $10,000. Jean's Juice uses a
corporate hurdle rate (cost of capital) of 18% for all of its
projects. If the juice machine project has a positive NPV of $5.00,
what does this mean?
Group of answer choices
The project's IRR is probably greater than 18%.
The project should be rejected.
The project earns $5.00 on the investment of $10,000.
The project's payback...
Consider the case of Blue Hamster Manufacturing Inc.:
Blue Hamster Manufacturing Inc. has to choose between...
Consider the case of Blue Hamster Manufacturing Inc.:
Blue Hamster Manufacturing Inc. has to choose between two
mutually exclusive projects. If it chooses project A, Blue Hamster
will have the opportunity to make a similar investment in three
years. However, if it chooses project B, it will not have the
opportunity to make a second investment. The following table lists
the cash flows for these projects:
Cash
Flows
Project
A
Project
B
Year
0:
–$10,000
Year
0:
–$40,000
Year
1:...
Year:
Project A Project
B Project
C Product
D Project E
Year:
Project A Project
B Project
C Product
D Project E
0
(10,000) (15,000)
(20,000) (50,000) (100,000)
1
4,000 8,000
7,000 10,000 33,000
2
4,000 6,000
7,000 15,000 40,000
3
4,000 4,000
7,000 (5,000) 33,000
4
------ 2,000
7,000
20,000 40,000
5
------ -----
------ 10,000 (10,000)
6
------
------
------ (1,000)
------
1. Calculate the payback of each project.
2. Calculate the discounted payback of each project (assume a
cost-of-capital of 10 percent).
3. Calculate the NPV of each project (again, assume 10
percent).
4. Calculate the PI of each project (again, assume...
Anderson Associates is considering two mutually exclusive
projects that have the following cash flows: Project A...
Anderson Associates is considering two mutually exclusive
projects that have the following cash flows: Project A Project B
Year Cash Flow Cash Flow 0 -$10,000 -$8,000 1 2,000 7,000 2 2,000
3,000 3 6,000 1,000 4 8,000 3,000
At what cost of capital do the two projects have the same net
present value? (That is, what is the crossover rate?) Enter your
answer rounded to two decimal places. Do not enter % in the answer
box. For example, if your...
Consider two projects with the following cash flows: Project S
is a 4 year project with...
Consider two projects with the following cash flows: Project S
is a 4 year project with initial (time 0) cash outflow of 3000 and
time 1 through 4 cash inflows of 1500, 1200, 800 and 300
respectively. Project L is a 4 year project with initial (time 0)
cash outflow of 3000 and time 1 through 4 cash inflows of 400, 900,
1300, and 1500 respectively. Assuming a 5% cost of capital,
determine which project should be chosen if the...
Consider two projects with the following cash flows: Project S
is a 4 year project with...
Consider two projects with the following cash flows: Project S
is a 4 year project with initial (time 0) cash outflow of 3000 and
time 1 through 4 cash inflows of 1500, 1200, 800 and 300
respectively. Project L is a 4 year project with initial (time 0)
cash outflow of 3000 and time 1 through 4 cash inflows of 400, 900,
1300, and 1500 respectively. Assuming a 5% cost of capital,
determine which project should be chosen if the...
You have to pick between three mutually exclusive projects with
the following cash flows to the...
You have to pick between three mutually exclusive projects with
the following cash flows to the firm: Year Project A Project B
Project C 0 -$10,000 $5,000 -$15,000 1 $8,000 $5,000 $10,000 2
$7,000 -$8,000 $10,000 The cost of capital is 12%. a. Which project
would you pick using the NPV rule? b. Which project would you pick
using the IRR rule? c. How would you explain the differences
between the two rules? Which one would you rely on to...
ABC Telecom has to choose between two mutually exclusive
projects. If it chooses project A, ABC...
ABC Telecom has to choose between two mutually exclusive
projects. If it chooses project A, ABC Telecom will have the
opportunity to make a similar investment in three years. However,
if it chooses project B, it will not have the opportunity to make a
second investment. The following table lists the cash flows for
these projects. If the firm uses the replacement chain (common
life) approach, what will be the difference between the net present
value (NPV) of project A...