Consider the following two mutually exclusive projects: Cash Flow Cash Flow Year (X) -$19,600 19,600 8,750 8,900 8,700 9,900 7,700 8,600 Calculate the IRR for each project. (Do not round intermedlate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Project X Project Y % What is the crossover rate for these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Crossover rate What is the NPV of Projects X and Y at discount rates of 0 percent, 15 percent, and 25 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 123

Consider the following two mutually exclusive projects: Cash Flow Cash Flow Year (X) -$19,600 19,600 8,750 8,900 8,700 9,900 7,700 8,600 Calculate the IRR for each project. (Do not round intermedlate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Project X Project Y % What is the crossover rate for these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Crossover rate What is the NPV of Projects X and Y at discount rates of 0 percent, 15 percent, and 25 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 123

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

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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, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS Project S requires an initial outlay at t = 0 of 17,000, and its expected cash flows would be 5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of 30,000, and its expected cash flows would be 8,750 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend? Explain.
Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
Consider the following two mutually exclusive projects: Year Cash Flow Cash Flow (X) (Y) 0 -$20,800 -$20,800 1 9,050 10,500 2 9,500 8,000 3 9,000 8,900 IRR Project X: 15.49% Project Y: 15.69% What is the crossover rate for these two projects? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Crossover rate ______%
Consider two mutually exclusive projects, A and B, whose costs and cash flows areshown in the following table:Year Project A Project B1 $(14,000) $(22,840)2 8,000 8,0003 6,000 8,0004 2,000 8,0005 3,000 8,000Calculate the cross over rate. Please use equations and not excel
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 −$ 20,200 −$ 20,200 1 8,900 10,200 2 9,200 7,850 3 8,850 8,750 Calculate the IRR for each project. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) What is the crossover rate for these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the NPV of Projects X and Y at discount rates of 0 percent, 15 percent, and 25 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
You must analyze two projects, X and Y. Each project costs $1,000, and the firm’s WACC is 10%. The expected net cash flows are as follows. Which project should be accepted if they are mutually exclusive? Year: 0 1 2 3 4 Project X: -$1,000 $500 $400 $300 $100 Project Y: -$1,000 $100 $300 $400 $675 Which answers? Y only X only None X and Y
Bruin, Incorporated, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$ 28,000 −$ 28,000 1 13,400 3,800 2 11,300 9,300 3 8,700 14,200 4 4,600 15,800 a-1. What is the IRR for each of these projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b-1. If the required return is 10 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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Bruin, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 28,700 –$ 28,700 1 14,100 4,150 2 12,000 9,650 3 9,050 14,900 4 4,950 16,500 a-1 What is the IRR for each of these projects? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) a-2 Using the IRR decision rule, which project should the company accept? Project A Project B a-3 Is this decision necessarily correct? Yes No b-1 If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2 Which project will the company choose if it applies the NPV decision rule? Project A Project B c.…
Use the following information for problems 1 to 5. Assume that the projects are mutually exclusive. Year Cash Flow (A) Cash Flow (B) 0 ($525,600) ($425,600) 1 $323,100 $235,900 2 $180,200 $163,900 3 $145,000 $135,000 4 $88,220 $79,000 What is the IRR for each of these projects? Using the IRR decision rule, which project should the company accept? Is this decision necessarily correct? If the required return is 13 percent, what is the NPV for each of these projects? Which project will the company choose if it applies the NPV decision rule? Over what range of discount rates would the company choose Project A? Project B? At what discount rate would the company be indifferent between these two projects? Explain. Compute the payback period for each project. Compute the profitability index for each project.
A firm evaluates all of its projects by applying the IRR rule. Year Cash Flow 0 –$ 148,000 1 68,000 2 71,000 3 55,000 What is the project's IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) A. The Initial Rate on Return