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- The following information on two mutually exclusive projects is given below: Which of the following statements is correct?(a) Since the two projects have the same rate of return, they are indifferent.(b) Project A would be a better choice because the required investment is smaller with the same rate of return.(c) Project B would be a better choice as long as the investor's MARR is lessthan 25%.(d) Project Bis a better choice regardless of the investor's MARR.c) Mr. Tim, the recently hired manager for this potential project is not convinced that using the IRR is sufficient to assess the project’s viability. Calculate the Modified Internal Rate of Return (MIRR) that should be used. d) Based off this MIRR, should the project be accepted? Explain why.Consider the following two mutually exclusive investment projects: Which project would you select if you used the infinite planning horizon withproject repeatability likely (same costs and benefits) based on the PW criterion? Assume that i = 12%.
- What is the NPV decision rule for discretionary mutually exclusive projects? A. Accept the project with the highest NPV, even if the NPV is negative. B. If there is sufficient capital, accept all positive-NPV projects. C. Accept the project with the highest IRR. D. Accept the project with the highest NPV, as long as the NPV is positiveYou should accept a project when the ?: net present value is negative. profitability index is positive. payback period exceeds the required period. AAR is greater than the required return. 7. Which one of the following statements is correct? The payback period is also referred to as the benefit-cost ratio. The internal rate of return can be reliably used for all independent projects. The profitability index is used when the investment funds are limited. The net present value should not be used to rank mutually exclusive projects. 8. You should accept a project when the ?: net present value is negative. profitability index is less than 1 but greater than 0. discounted payback period is less than the required period. AAR is less than the required return. 9. The crossover point ? : is used to determine which one of two internal rates of return for a project should be used when determining if a project should be accepted. 2. is the…29....When using the NPV method the decision making rationale includes the following (select all that apply): a.If projects are mutually exclusive, accept the project with the highest positive NPV. b.If projects are independent, accept if the project NPV<0. c.If projects are independent, accept if the project NPV>0 d.If the projects are mutually exclusive, accept the project with lowest NPV.
- Consider the mutually exclusive alternatives in the shown table. Which alternative would be chosen according to these decision criteria?Solve, a. Maximum benefit b. Minimum cost c. Maximum benefits minus costs d. Largest investment having an incremental B–C ratio larger than one e. Largest B–C ratio Which project should be chosen?a. Calculate the projects’ NPVs, IRRs, MIRRs, regular paybacks, and discounted paybacks.b. If the two projects are independent, which project(s) should be chosen?c. If the two projects are mutually exclusive and the WACC is 10%, which project(s)should be chosen?d. Plot NPV profiles for the two projects. Identify the projects’ IRRs on the graph.e. If the WACC was 5%, would this change your recommendation if the projects weremutually exclusive? If the WACC was 15%, would this change your recommendation?Explain your answers.f. The crossover rate is 13.5252%. Explain what this rate is and how it affects the choicebetween mutually exclusive projects.g. Is it possible for conflicts to exist between the NPV and the IRR when independentprojects are being evaluated? Explain your answer.h. Now look at the regular and discounted paybacks. Which project looks better whenjudged by the paybacks?i. If the payback was the only method a firm used to accept or reject projects, what paybackshould it…2) The expected return of Project Y is at least equal to the expected return of Project X, and the variance of Y is less than that of X. What would you do? A) Prefer Project Y B) Accept both projects C) Prefer Project X D) Reject both projects.
- a. Explain why the IRR may contradict the ranking of NPV and therfore not recmmeneded to use when choosing among mutually exclusive projects.\ (5 lines) b. Give two possible examples of such projects. (choose realistic projects, or actual projects you know of) Exaplain your choice?Consider the following investment projects. Determine the range of MARR for which Project 2 would be preferred overProject 1.(a) MARR ≤ 12.5%(b) 13% ≤ MARR s 15%(c) 16% ≤ MARR(d) Not enough information to determineThe following information on two mutually exclusive projects is given below:n Project A Project B0 -3,000 -5,0001 1,350 1,3502 1,800 1,8003 1,500 5,406IRR 25% 25%Which of the following statements is correct?(a) Since the two projects have the same rate of return, they are indifferent.(b) Project A would be a better choice, as the required investment is smaller withthe same rate of return.(c) Project B would be a better choice as long as the investor’s MARR is lessthan 25%.(d) Project B is a better choice regardless of the investor’s MARR