Question

CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS Project S costs $17,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L costs $30,000, and its expected cash flows would be $8,750 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend? Explain. Which project would you recommend? Explain.

Answer #1

S:

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=5000/1.12+5000/1.12^2+5000/1.12^3+5000/1.12^4+5000/1.12^5

=18023.88

NPV=Present value of inflows-Present value of outflows

=18023.88-17000

=$1023.88(Approx)

L:

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=8,750/1.12+8,750/1.12^2+8,750/1.12^3+8,750/1.12^4+8,750/1.12^5

=31541.79

NPV=Present value of inflows-Present value of outflows

=31541.79-30,000

=$1541.79(Approx)

**Hence since projects are mutually exclusive;project L
must be selected only having higher NPV.**

Capital budgeting criteria: mutually exclusive projects. Project
S costs $17,000 and its expected cash flow would be $5,000 per year
5 years. Mutually exclusive Project L costs $30,000 and its
expected cash flow would be $8,750 per year for 5 years. If both
projects have a WACC of 12%, which project would you recommend?
Explain.
**Show Work**

(Capital Budgeting Criteria: Mutually Exclusive Projects)
Project S costs $17,000 and its expected cash flows would be
$4,500 per year for 5 years. Mutually exclusive Project L costs
$28,500 and its expected cash flows would be $11,250 per year for 5
years. If both projects have a WACC of 15%, which project would you
recommend?
Select the correct answer.
a. Project L, since the NPVL >
NPVS.
b. Both Projects S and L, since both projects have IRR's >
0....

CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE
PROJECTS
Project S costs $15,000 and its expected cash flows would be
$6,500 per year for 5 years. Mutually exclusive Project L costs
$45,000 and its expected cash flows would be $9,900 per year for 5
years. If both projects have a WACC of 16%, which project would you
recommend?
Select the correct answer.
a. Project S, since the
NPVS > NPVL.
b. Both Projects S and L, since
both projects have NPV's > 0....

Capital budgeting criteria: mutually exclusive projects
Project S costs $15,000 and its expected cash flows would be
$5,500 per year for 5 years. Mutually exclusive Project L costs
$40,500 and its expected cash flows would be $10,800 per year for 5
years. If both projects have a WACC of 15%, which project would you
recommend?
Select the correct answer.
I. Both Projects S and L, since both projects have NPV's >
0.
II. Project L, since the NPVL >
NPVS....

Capital budgeting criteria: mutually exclusive projects
Project S costs $11,000 and its expected cash flows would be
$4,000 per year for 5 years. Mutually exclusive Project L costs
$32,000 and its expected cash flows would be $14,700 per year for 5
years. If both projects have a WACC of 15%, which project would you
recommend?
Select the correct answer.
I. Neither S or L, since each
project's NPV < 0.
II. Project L, since the NPVL >
NPVS.
III. Project...

11-11 CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS
$225 $225 $50 $49 Project S costs $15,000, and its expected cash
flows would be $4,500 per year for 5 years. Mutually exclusive
Project L costs $37,500, and its expected cash flows would be
$11,100 per year for 5 years. If both projects have a WACC of 14%,
which project would you recommend? Explain

Project S costs $13,000 and its expected cash flows would be
$5,000 per year for 5 years. Mutually exclusive Project L costs
$34,500 and its expected cash flows would be $11,100 per year for 5
years. If both projects have a WACC of 15%, which project would you
recommend? Select the correct answer. a. Project S, since the NPVS
> NPVL. b. Both Projects S and L, since both projects have NPV's
> 0. c. Both Projects S and L,...

Project S costs $16,000 and its expected cash flows would be
$4,000 per year for 5 years. Mutually exclusive Project L costs
$29,500 and its expected cash flows would be $9,300 per year for 5
years. If both projects have a WACC of 14%, which project would you
recommend?
Select the correct answer.
a. Neither Project S nor L, since each project's NPV <
0.
b. Both Projects S and L, since both projects have IRR's >
0.
c. Project...

Project S costs $19,000 and its expected cash flows would be
$6,500 per year for 5 years. Mutually exclusive Project L costs
$32,000 and its expected cash flows would be $8,850 per year for 5
years. If both projects have a WACC of 13%, which project would you
recommend? Select the correct answer.
a. Project L, since the NPVL > NPVS.
b. Both Projects S and L, since both projects have NPV's >
0
. c. Both Projects S and...

Project S costs $12,000 and its expected cash flows would be
$5,500 per year for 5 years. Mutually exclusive Project L costs
$26,000 and its expected cash flows would be $11,500 per year for 5
years. If both projects have a WACC of 14%, which project would you
recommend?
Select the correct answer.
a. Both Projects S and L, since both projects have NPV's >
0.
b. Project S, since the NPVS >
NPVL.
c. Neither Project S nor L,...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 11 minutes ago

asked 12 minutes ago

asked 14 minutes ago

asked 18 minutes ago

asked 31 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago