Question

Suppose you are faced with choosing between two mutually exclusive projects. Your boss asked you to use the Replacement Chain method. The first project offers cash flows of $15,000 in years one and two, and $20,000 in years three, four, and five. It has an initial cost of $25,000. The second project offers cash flows of $25,000 per year for four years, and then $45,000 per year for six additional years (total project life of 10 years). It has an initial cost of $18,000. The firm has a weighted average cost of capital of 10%. Which project should the firm accept? Show your full work.

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Answer #1

18) a firm needs to decide between two mutually exclusive
projects. Porject Alpha requires an initial investment of $29,000
today and is expected to generate cash flow of $43,000 for the next
3 years. Project Beta requires an initial investment of $60,000 and
is expected to generate cash flows of $45,000 for the next 6 years.
The cost of capital is 11%. The projects can be repeated with no
change in cash flows. What is the NPV of the project...

A firm needs to decide between two mutually exclusive projects.
Project Alpha requires an initial investment of $37,000 today and
is expected to generate cash flows of $31,000 for the next 4 years.
Project Beta requires an initial investment of $92,000 and is
expected to generate cash flows of $36,400 for the next 8 years.
The cost of capital is 10%. The projects can be repeated with no
change in cash flows. What is the NPV of the project that...

A firm needs to decide between two mutually exclusive projects.
Project Alpha requires an initial investment of 50,000 today and is
expected to generate cash flows of 51,000 for the next 3 years.
Project Beta requires an intial investment of 85,000 and is
expected to generate cash flows of 49,700 for the next 6 years. The
cost of capital is 6%. The projects can be repeated with no charge
in cash flows. What is the NPV of the project that...

Your firm is considering two projects. Your boss asked you to
use the Equivalent Annual Annuity method. Project A has an expected
life of seven years, will cost $50,000,000, and will produce net
cash flows of $12,000,000 each year. Project B has a life of
fourteen years, will cost $60,000,000, and will produce net cash
flows of $10,000,000 each year. The firm’s cost of capital is 12%.
What is the equivalent annual annuity for each project? Which
project should the...

a
firm must choose between two mutually exclusive projects, a &
b. project a has an initial cost of $10000. its projected net cash
flows are $800, $2000, $3000, $4000, and $5000 at the end of years
1 through 5, respectively. project b has an initial cost of $14000,
and its projected net cash flows are $7000, $5000, $3000, $2000,
and $1000 at the end of years 1 through 5, respectively. at what
cost of capital would the firm be...

A firm must choose between two mutually exclusive projects, A
& B. Project A has an initial cost of $11000. Its projected net
cash flows are $900, $2000, $3000, $4000, and $5000 at the end of
years 1 through 5, respectively. Project B has an initial cost of
$15000, and its projected net cash flows are $7000, $5000, $3000,
$2000, and $1000 at the end of years 1 through 5, respectively. At
what cost of capital would the firm be...

11) Your company is choosing between two MUTUALLY EXCLUSIVE
projects that have a required rate of return of 8.25%. You have
gathered the following data. Which of the project(s) should be
accepted?
IRR
NPV
Project A
6.40%
$ 22.6 million
Project B
8.50%
$ 16.1 million
A) Accept neither project, as both have a required return that
is above the IRR.
B) Accept project B with the higher IRR.
C) Accept project A with the higher NPV.
D) Accept both...

A firm has a WACC of 11% and is deciding between two mutually
exclusive projects. Project A has an initial investment of $61. The
additional cash flows for project A are: year 1 = $15, year 2 =
$37, year 3 = $67. Project B has an initial investment of $73.The
cash flows for project B are: year 1 = $56, year 2 = $42, year 3 =
$21. Calculate the payback and
NPV for each project. (Show all
answers...

Benton Exploration Company is considering two mutually exclusive
projects. Project A has a cost of $10,000 and is expected to
generate net cash flows of $4,000 per year for 5 years. Project B
has a cost of $25,000 and is expected to generate net cash flows of
$9,000 per years for 5 years. Benton's cost of capital is 15
percent.
Based on the net present value (NPV) method, which project
should be undertaken?
Group of answer choices
Project A
Project...

A firm must choose between two mutually exclusive projects, A
& B. Project A has an initial cost of $11000. Its projected net
cash flows are $900, $2000, $3000, $4000, and $5000 at the end of
years 1 through 5, respectively. Project B has an initial cost of
$15000, and its projected net cash flows are $7000, $5000, $3000,
$2000, and $1000 at the end of years 1 through 5, respectively. If
the firm’s cost of capital is 6.00%: Project...

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