Question

Light Sweet Petroleum, Inc., is trying to evaluate an exploration project with the following cash flows:

Year Cash Flow

0 -$39,000,000

1 63,000,000

2 -12,000,000

If the company requires a 12 percent return on its investments, should it accept this project?

Yes, the IRR is below the 12% hurdle rate

No, the IRR is above the 12% hurdle rate

Cannot determine because there are multiple IRRs

Yes, the NPV is positive

No, the NPV is negative

Answer #1

NPV = PV of cash in flow - Initial investment

Initial Investment = $39,000,000

PV of cash in flow for first year at 12% hurdle rate = 63,000,000 * 0.893 = 56,259,000

PV of cash in flow for second year at 12% hurdle rate = (12,000,000) * 0.797 = (9,564,000)

Total PV of cash in flow = 56,259,000 + (9,564,000) = 46,695,000

NPV = 46,695,000 - 39,000,000 = 7695000

NPV = 7695000 So NPV IS POSITIVE AND WE AN ACCEPT THIS PROJECT.

**Right answer is , Yes the NPV is positive**

**A project with NPV positive and IRR > hurdle rate is
acceptable and project with NPV negative and IRR < hurdle rate
is rejected. Here first option says that the project is acceptable
because IRR is below than hurdle rate that option itself is wrong
and so there is no need of calculation for IRR. So the first three
options are wrong. As the NPV is positive Option four is right and
fifth option is wrong.**

light Sweet Petroleum Inc, is trying to evaluate a generation
project with the following cash flows. If the company requires a
return of 12 percent on its investments, what is the project's NPV?
what are the IRRs for the project.
Year 0 $ 46,000,000
Year 1 $ 71,000,000
Year 2 $ (15,000,000)
Required return 12%
Use a "guess" of .99 to calculate the higher IRR and -.99 to
calculate the lower IRR

Light Sweet Petroleum, Inc., is trying to evaluate a generation
project with the following cash flows:
Year
Cash Flow
0
–$
38,200,000
1
62,200,000
2
–
11,200,000
a-1
What is the NPV for the project if the company requires a return
of 12 percent? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
a-2
Should the company accept this project?
Yes
No
b.
This project has two IRR's, namely...

Howell Petroleum Inc is trying to evaluate a generation project
with the following cash flows:
Year Cash Flow
0
-39,000,000
1
57,000,000
2 -9,000,000
a) If the company requires a return of 10% on its investments,
should it accept this project? Why?
b) Compute the IRR for this project. How many IRR's are there?
If you apply the IRR decision rule, should you accept the project
or not? Whats going on here?
I'd like to solve this problem in excel....

Kong Petroleum, Inc. is trying to evaluate a generator project
with the following cash flows:
Year
Cash Flow
0
-28,000,000
1
53,000,000
2
-8,000,000
If the company requires a 10% return on its investments, should
it accept this project? Why?
Compute the IRR for this project. How many IRRs are there? If
you apply the IRR decision rule, should you accept the project or
not? What’s going on here?
*Please type the calculations and answers*

Cutler Petroleum, Inc., is trying to evaluate a generation
project with the following cash flows:
Year Cash Flow
0 –$ 85,000,000
1 125,000,000
2 – 15,000,000
A. If the company requires a 10% return on its investment should
it accept this project? Why?
b.Compare the project IRR for this project. How many IRRs are
there? If you should apply the IRR division rule. Should you accept
the project or not.? What's going on here?

Howell Petroleum, Inc., is trying to evaluate a generation
project with the following cash flows:
Year
Cash Flow
0
–$
43,000,000
1
67,500,000
2
–
18,000,000
a. If the company requires a return of 11 percent
on its investments, what is the NPV of the project? (Do not
round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
NPV
$
b. Compute the IRRs for this project. (Do
not round intermediate calculations and...

Cutler Petroleum, Inc., is trying to evaluate a generation
project with the following cash flows: Year Cash Flow 0 –$
38,800,000 1 62,800,000 2 – 11,800,000 a-1 What is the NPV for the
project if the company requires a return of 12 percent? (Do not
round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.) NPV $ a-2 Should the firm accept this
project? No Yes b. This project has two IRRs, namely percent and
percent, in...

Howell Petroleum, Inc., is trying to evaluate a generation
project with the following cash flows:
Year
Cash Flow
0
–$38,000,000
1
56,000,000
2
–9,000,000
a.
If the company requires a 10 percent return on its investments,
what is the NPV of the project? (Do not
round intermediate calculations and round your
answer to 2 decimal places, e.g., 32.16.)
b.
Compute the IRRs for this project. (A negative answer
should be indicated by a minus sign. Enter your...

Bohrer Mining, Inc., is trying to evaluate a project with the
following cash flows:
Year
Cash Flow
0
-$38,100,000
1
62,100,000
2
-11,100,000
a-1 What is the NPV for the project if the
company requires a return of 10 percent? (Do not round
intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
a-2 Should the firm accept this project?
b. This project has two IRRs, namely ____?____
percent and ____?____ percent, in order from smallest to largest....

A capital investment project requires an initial investment of
$100 and generates positive cash flows, $50 and $100, at the end of
the first and second years, respectively. (There is no cash flow
after the second year) The firm uses a hurdle rate of 15% for
projects of similar risk.
Determine whether you should accept or reject the project based
on NPV.
Determine whether you should accept or reject the project based
on IRR.
Determine whether you should accept or...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 37 minutes ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 4 hours ago

asked 4 hours ago

asked 5 hours ago

asked 5 hours ago