Two mutually exclusive investment projects have the following forecasted cash flows: Year A B 0 -$25,000 -$25,000 1 +10,000 0 2 +10,000 0 3 +10,000 0 4 +10,000 +50,000 Use Table II and Table IV to answer the questions. Compute the internal rate of return for each project. Round your answers to one decimal place. IRRA: % IRRB: % Compute the net present value for each project if the firm has a 9 percent cost of capital. Round your answers to the nearest dollar. NPVA: $ NPVB: $ Which project should be adopted? Why? should be chosen because it has the higher . It is assumed that the firm's reinvestment opportunities are more accurately represented by the .
Two mutually exclusive investment projects have the following forecasted cash flows: Year A B 0 -$25,000 -$25,000 1 +10,000 0 2 +10,000 0 3 +10,000 0 4 +10,000 +50,000 Use Table II and Table IV to answer the questions. Compute the internal rate of return for each project. Round your answers to one decimal place. IRRA: % IRRB: % Compute the net present value for each project if the firm has a 9 percent cost of capital. Round your answers to the nearest dollar. NPVA: $ NPVB: $ Which project should be adopted? Why? should be chosen because it has the higher . It is assumed that the firm's reinvestment opportunities are more accurately represented by the .
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 7P
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Question
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Two mutually exclusive investment projects have the following
Year | A | B | ||||
0 | -$25,000 | -$25,000 | ||||
1 | +10,000 | 0 | ||||
2 | +10,000 | 0 | ||||
3 | +10,000 | 0 | ||||
4 | +10,000 | +50,000 |
Use Table II and Table IV to answer the questions.
-
Compute the
internal rate of return for each project. Round your answers to one decimal place.
IRRA: %IRRB: %
-
Compute the
net present value for each project if the firm has a 9 percent cost of capital. Round your answers to the nearest dollar.
NPVA: $NPVB: $
-
Which project should be adopted? Why?
should be chosen because it has the higher . It is assumed that the firm's reinvestment opportunities are more accurately represented by the .
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