A Moving to another question will save this response.Quèstion 5When evaluating mutually exclusive projects with different lives and different levels of risk, which of the following methods should NOT be used?O None of the listed choices can be used in the evaluation.O Replacement chainO Infinite replacementO Each of the listed choices can be used in the evaluation.O NPVA Moving to another question will save this response.MacBook Air20 13escFS- FOF2F4$&*23567QRYUASD.GKCVBoltplioncommandFI2N

The question is related to capital budgeting. Mutually exclusive projects are those projects in…

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Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Given the following two mutually exclusive projects, always choose Project A (the project with a higher IRR). Project NPV IRR A $100 10.5% B $150 9.5% Group of answer choices True False
12. Which of the following statements is CORRECT? Group of answer choices To find the MIRR, we discount the TV at the IRR. The discounted payback method eliminates all of the problems associated with the payback method. The IRR method appeals to some managers because it gives an estimate of the rate of return on projects rather than a dollar amount, which the NPV method provides. A project's NPV profile must intersect the X-axis at the project's WACC. When evaluating independent projects, the NPV and IRR methods often yield conflicting results regarding a project's acceptability.
The Ulrich Corporation is trying to choose between the following two mutually exclusive design projects. If the required rate of return is 10%, which of the following statements is correct? (a) Select A2 because it has a higher PI.(b) Select A2 because it has a higher RO R. (c) Select Al because its incremental PI exceeds 1.(d) Not enough information to decide.
If we are comparing projects of unequal sizes (requiring unequal amounts of investment), screening methods like NPV are only good for deciding if a product or service is worth considering along with other valid opportunities. In that case, we have to use a ranking method after screening the projects. How do we do that? For example, you have been given the following information: (n = 3; i = 10%) How will you rank these projects? Project R Project S Project T Investment required $13,000 $59,000 $89,000 Annual net cash flows $6,000 $25,000 $43,000
Suppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Which of the following independent projects should Tapley accept, assuming that the company uses the NPV method when choosing projects? Project B, which has below-average risk and an IRR = 8.5%. All of these projects should be accepted as they will produce a positive NPV. Without information about the projects’ NPVs we cannot determine which one or ones should be accepted. Project C, which has above-average risk and an IRR = 11%. Project A, which has average risk and an IRR = 9%. (I want see step to step to get the answer Project B, which has below-average risk and an IRR = 8.5%.
The 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
Mr. Cyrus Clops, the president of Giant Enterprises, has to make a choice between two possible investments Project C0 C1 C2 C3 C4 IRR A -450 250 300 208 250 43% B -225 120 179 200 150 57% Mr. Clops is tempted to take B, which has the higher IRR. Show him how to adapt the IRR rule to choose the best project Multiple Choice WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is less thant the IIRR= 7% WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops should take project A when the discount rate is less thant the IIRR= 25.4% WIn this case project B has a higher IRR than project A. However, project B is half the size of project A. Mr. Clops can compute the incremental IRR (IIRR). Mr. Clops…
Please solve for the following problem on the image. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 48.57%.) a. Project A b. Project B c. Neither Project A or B If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 48.57%.) a. Project A b. Project B c. Neither Project A or B If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 48.57%.) a. Project A b. Project B c. Neither Project A or B
True or false Suppose that a project has a unique IRR=20%. The hurdle rate is 25%. Your boss says this means you should accept this project.
You are choosing between two projects, A and B. Project A has an IRR of 10% and Project B has an IRR of 12% (each has only one IRR - i.e., no IRR "math" problems). Select all of the following statements that are true (regardless of the other unknown details for the projects). Group of answer choices If the discount rate is 11%, one should select only Project B If the projects are independent and the discount rate is 9%, one should select Project B only If the projects are mutually exclusive and the discount rate is 9%, one should select Project B only If the projects are mutually exclusive and the discount rate is 11%, one should select Project B only If the projects are mutually exclusive and the discount rate is 9%, one should select Project A only If the projects are independent and the discount rate is 9%, one should select both projects
A firm with a WACC of 10% is considering the following mutually exclusive projects: 0 1 2 3 4 5 Project 1 -$350 $65 $65 $65 $210 $210 Project 2 -$400 $250 $250 $145 $145 $145 Which project would you recommend? Select the correct answer. a. Neither Project 1 nor 2, since each project's NPV < 0. b. Both Projects 1 and 2, since both projects have NPV's > 0. c. Project 1, since the NPV1 > NPV2. d. Both Projects 1 and 2, since both projects have IRR's > 0. e. Project 2, since the NPV2 > NPV1.
ABC Company is considering to select one of the 3 projects based on the risk (probability p) and costs: 1. Project 1: a.no modifications: p=.6, $400,000b.slight modifications: p=.4, $500,000.2. Project 2: a.Complex, p=.4, $600,000b.Simple, p =.6, •with some revisions p=.7, $400,000• with no revisions, p.=.3, $300,0003. Project 3: a.Complex, p=.5, $400,000b.Simple, p=.5, $600,000Compute EMV for each option. Which option should be selected (the lowest cost)? Hint: Use Expected Monetary Value (EMV) in PPT Slide 38 to compute the costs.

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