CJ Lance Co. is considering two Mutually Exclusive Projects Project Alpha-1 is expected to generate cash flows of $3,250 each year of its 5 year life. The project will cost $11,000. Project Beta-2 is expected to produce $8,000 in cash flows per year. It also has a 5 year life, and costs $27,750. The Cost of Capital is 12% and these projects are of normal risk. Calculate the NPV, IRR, and MIRR for each of the projects. b. Given that they are mutually exclusive, which project should be selected based on each ranking а. method? с. Now which project should be chosen? Why?
CJ Lance Co. is considering two Mutually Exclusive Projects Project Alpha-1 is expected to generate cash flows of $3,250 each year of its 5 year life. The project will cost $11,000. Project Beta-2 is expected to produce $8,000 in cash flows per year. It also has a 5 year life, and costs $27,750. The Cost of Capital is 12% and these projects are of normal risk. Calculate the NPV, IRR, and MIRR for each of the projects. b. Given that they are mutually exclusive, which project should be selected based on each ranking а. method? с. Now which project should be chosen? Why?
Chapter9: Capital Budgeting Techniques
Section: Chapter Questions
Problem 7PROB
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Transcribed Image Text:FIN 6020
v19f
CJ Lance Co. (Ch 10)
CJ Lance Co. is considering two Mutually Exclusive Projects
Project Alpha-1 is expected to generate cash flows of $3,250 each year of its 5 year life. The project will
cost $11,000.
Project Beta-2 is expected to produce $8,000 in cash flows per year. It also has a 5 year life, and costs
$27,750.
The Cost of Capital is 12% and these projects are of normal risk.
a. Calculate the NPV, IRR, and MIRR for each of the projects.
а.
b. Given that they are mutually exclusive, which project should be selected based on each ranking
method?
С.
Now which project should be chosen? Why?
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