Question

The Following Table Applies to Questions 20 through Question 27. Project R and S are m utually exclusive projects, Project R and S and their cost of capital (or discount rate) is 11%. What is the NPV for project R? Year Project R Project S 0 -$100,000 -$200,000 1 40,000 200,000 2 40,000 50,000 3 40,000 40,000 4 40,000 30,000 5 40,000 10,000 $47,835.88 $75,705.40 $27,869.52 $100,000

Answer #1

Project | ||||||

Discount rate | 11.000% | |||||

Year | 0 | 1 | 2 | 3 | 4 | 5 |

Cash flow stream |
-100000 | 40000 | 40000 | 40000 | 40000 | 40000 |

Discounting factor | 1.000 | 1.110 | 1.232 | 1.368 | 1.518 | 1.685 |

Discounted cash flows project | -100000.000 | 36036.036 | 32464.897 | 29247.655 | 26349.239 | 23738.053 |

NPV = Sum of discounted cash flows | ||||||

NPV Project = | 47835.88 | |||||

Where | ||||||

Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||||

Discounted Cashflow= | Cash flow stream/discounting factor |

The two projects are as follows. Discount rate = 10%.
Project
X Project Y
Year Cash-Flow
Cash-Flow
0
-$100,000 -$100,000
1
50,000 10,000
2
40,000 30,000
3 30,000 40,000
4.
10,000
60,000
Calculate the payback period of project X
1.33 years
2.33 years
3.33 years
4.33 years
Calculate the crossover rate.
6.93%
6.58%
10.00%
7.17%
Imagine that discount is 5%, and the two projects are mutually
exclusive, which project shall you choose?...

A firm has the following investment alternatives.
A firm has the following investment
alternatives.
Year Project
A Project
B
Cash Flow Cash
Flow
0 -$100,000 -$100,000
1 50,000
10,000
2 40,000
30,000
3 30,000
40,000
4 10,000
60,000
The firm's cost of capital is 7%. Project A and project B are
mutually exclusive. Which investment(s) should the firm make?
Project A because it has the higher IRR
Project A because it has the higher NPV
Neither because both have IRRs less than the cost of capital
Project B...

5. As the director of capital budgeting for Bissett
Corporation, you are evaluating two
mutually exclusive projects (you can
only choose one) with the following cash flows. The
discount rate is 15%.
Year
Project X
Project Y
0
- 100,000
- 100,000
1
50,000
10,000
2
40,000
30,000
3
10,000
40,000
4
10,000
30,000
Which project would you choose?
a. Project X since it has
higher IRR
b. Project Y since it has
higher NPV
c. Project X since it has
higher NPV
d. Neither project

5. As the director of capital budgeting for Bissett Corporation,
you are evaluating two
mutually exclusive projects (you can
only choose one) with the following cash flows. The discount rate
is 15%.
Year
Project X
Project Y
0
- 100,000
- 100,000
1
50,000
10,000
2
40,000
30,000
3
10,000
40,000
4
10,000
30,000

QUESTION 20
For this and the next 3 questions. Consider the following
MUTUALLY EXCLUSIVE projects. Cost of capital is 10%. Calculate
IRR.
Year
Project A
Project B
0
-40,000
-20,000
1
8,000
7,000
2
14,000
13,000
3
13,000
12,000
4
12,000
5
11,000
6
10,000
IRR (A) = 17.47%. IRR(B) = 25.20%
IRR (A) = 17.77%. IRR(B) = 25.20%
IRR (A) = 17.47%. IRR(B) = 20%
None of the above is completely correct
1 points
QUESTION 21
Calculate NPV...

As the director of capital budgeting for Denver Corp., you are
evaluating two mutually exclusive projects with the following net
cash flows:
Project
X Project
Z
Year Cash
Flow Cash
Flow
0 -$100,000 -$100,000
1 50,000 10,000
2 40,000 30,000
3 30,000 40,000
4 10,000 60,000
If Denver’s cost of capital is 15 percent, which project would you
choose?
Neither project.
Project X, since it has the higher IRR.
Project Z, since it has the higher NPV.
Project X, since it has the higher NPV.
Project Z, since it has the higher IRR....

Use the table for the question(s) below.
Complete in Excel Show Work.
Consider the following list of projects:
Project
Investment
NPV
A
135,000
6,000
B
200,000
30,000
C
125,000
20,000
D
150,000
2,000
E
175,000
10,000
F
75,000
10,000
G
80,000
9,000
H
200,000
20,000
I
50,000
4,000
23.a) Assuming that your capital is constrained, which
investment tool should you use to determine the correct investment
decisions?
23.b) Assuming that your capital is constrained, which
project should you invest in...

Question 1
A company is deciding
among two mutually exclusive projects. Project A’s initial cost is
$40,000, and Project B’s initial cost is 30,000. The two projects
have the following cash flows:
Project
A
Project B
Year
Cash Flow Cash Flow
1
10,000
8,000
2
15,000
12,000
3
20,000
20,000
4
20,000
15,000
The company's weighted
average cost of capital is 11 percent. What is the net present
value (NPV) of the project A?...

P10-21 (similar to)
All techniques, conflicting rankings Nicholson Roofing
Materials, Inc., is considering two mutually exclusive projects,
each with an initial investment of
$100,000.
The company's board of directors has set a 4-year payback
requirement and has set its cost of capital at
9%.
The cash inflows associated with the two projects are shown in
the following table:
LOADING...
.
a. Calculate the payback period for each project. Rank the
projects by payback period.
b. Calculate the NPV of each...

Two mutually exclusive investment opportunities require an
initial investment of $100,000 and generate the following cash
flows. At what cost of capital would an investor regard both
opportunities as being equivalent?
Project A
Project B
Time 0
-100,000
-100,000
Time 1
50,000
40,000
Time 2
45,000
30,000
Time 3
30,000
60,000
14%
18%
20%
24%

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