Question

1.-You are evaluating a project that will cost $499,000​, but is expected to produce cash flows...

1.-You are evaluating a project that will cost $499,000​, but is expected to produce cash flows of $123,000 per year for 10 ​years, with the first cash flow in one year. Your cost of capital is 10.6% and your​ company's preferred payback period is three years or less.

a. What is the payback period of this​ project?

b. Should you take the project if you want to increase the value of the​ company?

2.- You are choosing between two projects. The cash flows for the projects are given in the following table​ ($ million):

Project

Year 0

Year 1

Year 2

Year 3

Year 4

A

negative $ 48−$48

$ 26$26

$ 19$19

$ 19$19

$ 15$15

B

negative $ 101−$101

$ 22$22

$ 42$42

$ 48$48

$ 61$61

a. What are the IRRs of the two​ projects?

b. If your discount rate is 5.1%​, what are the NPVs of the two​ projects?

c. Why do IRR and NPV rank the two projects​ differently?

Homework Answers

Answer #1

1)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the projects are given in the following table​ ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A negative $ −$52 $26 $ $21 $22 $17 B negative $−$102 $22 $42 $49 $58 a. What are the IRRs of the two​ projects? b. If your discount rate is 5.3 %5.3%​, what are the NPVs of the two​ projects? c. Why do IRR and NPV rank the...
1.- You are choosing between two projects. The cash flows for the projects are given in...
1.- You are choosing between two projects. The cash flows for the projects are given in the following table​ ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$48 $26 $19 $19 $15 B −$101 $22 $42 $48 $61 a. What are the IRRs of the two​ projects? b. If your discount rate is 5.1%​, what are the NPVs of the two​projects? c. Why do IRR and NPV rank the two projects​ differently? 2.- You...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the projects are given in the following table? ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A -$52 $ 26 $ 21 $20 $17 B -$101 $ 21 $ 38 $48 $61 a. What are the IRRs of the two? projects? IRR for project A is _ ?IRR for project B is _ b. If your discount rate is 5.1 % what are the NPVs...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the projects are given in the following table​ ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$48 $26 $21 $21 $$13 B −$100 $22 $40 $51 $58 a. What are the IRRs of the two​ projects? b. If your discount rate is 5.1%​, what are the NPVs of the two​ projects? c. Why do IRR and NPV rank the two projects​ differently?
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the projects are given in the following table​ ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A: - $49   $23 $19 $22 $17 B: - $102 $20 $40 $48 $60 a. What are the IRRs of the two​ projects? - The IRR for project A is ? - The IRR for project B is ? b. If your discount rate is 5.5 %​, what are...
Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of...
Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects' NPVs (in dollars), assuming the cost of capital of 10%. (Round your answers to the nearest cent.) S$ L$ Calculate the two projects' IRRs (as percents), assuming the cost of capital of 10%. (Round your answers...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the projects are given in the following table​ ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A negative $ 49−$49 $ 23$23 $ 20$20 $ 21$21 $ 13$13 B negative $ 98−$98 $ 20$20 $ 42$42 $ 50$50 $ 60$60 a. What are the IRRs of the two​ projects? b. If your discount rate is 4.8 % what are the NPVs of the two​ projects?...
Project S has a cost of $9,000 and is expected to produce benefits (cash flows) of...
Project S has a cost of $9,000 and is expected to produce benefits (cash flows) of $2,700 per year for 5 years. Project L costs $26,000 and is expected to produce cash flows of $7,100 per year for 5 years. Calculate the two projects' NPVs, assuming a cost of capital of 10%. Round your answers to the nearest cent. Project S $ ________     Project L $ ________     Which project would be selected, assuming they are mutually exclusive? _________________...
You are choosing between two projects. The cash flows for the projects are given in the...
You are choosing between two projects. The cash flows for the projects are given in the following table​ ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A: - $50 $25 $22 $19 $13 B: - $98 $21 $41 $50 $62 a. What are the IRRs of the two​ projects? - The IRR for project A is ? - The IRR for project B is ? b. If your discount rate is 5.1 %​, what are...
Here are the expected cash flows for three projects: Cash Flows (dollars) Project Year: 0 1...
Here are the expected cash flows for three projects: Cash Flows (dollars) Project Year: 0 1 2 3 4 A − 6,300 + 1,325 + 1,325 + 3,650 0 B − 2,300 0 + 2,300 + 2,650 + 3,650 C − 6,300 + 1,325 + 1,325 + 3,650 + 5,650 a. What is the payback period on each of the projects? b. If you use a cutoff period of 2 years, which projects would you accept? Project A Project B...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT