NPV (Dollars) 400 300 200 A 100 B -100 -200 4 6 8 10 12 14 16 18 20 COST OF CAPITAL (Percent) A B The point at which the NPV profile intersects the horizontal axis represents the
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- (use the attached picture to answer question) (6.3) This question relates to the Quiz 6.3 diagram, which shows the NPV profile for Projects X and Y. For what range of costs of capital is the NPV of both projects negative? Select one: a. Greater than 9% b. Between 9% and 13% c. Less than 4% d. Greater than 13%Consider the following two mutually exclusive projects. Time Project A Project B 0 -$300 -$405 1 -$387 $134 2 -$193 $134 3 $100 $134 4 $600 $134 5 $600 $134 6 $850 $150 7 $180 $284 What is each project’s payback, discounted payback, IRR, and NPV with a cost of capital of 12%? Which project should be selected?Project C0 C1 C2 C3 C4 A -5000 +1000 +1000 +3000 0 B -1000 0 +1000 +2000 +3000 C -5000 +1000 +1000 +3000 +5000 What are the internal rates of return (IRR) on the three projects? Does the IRR rule in this case give the same decision as NPV? How do you know? If the opportunity cost of capital is 11%, what is the profitability index for each project? Please analyze if, in general, decisions based on profitability index are consistent with decisions based on NPV. What is the most generally accepted measure to choose between the projects? Please justify your answer.
- 5). The HC Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow I (in dollars) Cash Flow II (in dollars) 0 -64, 000 -18,000 1 31, 000 9,700 2 31, 000 9,700 3 31, 000 9,700 a). If the required return is 10%, and the company applies the profitability index decision rule, which project should the firm accept? Why? b). If the company applies the NPV decision rule, which project should it take? Why? c). Explain why your answers in (a) and (b) are different.Consider the following two mutually exclusive projects: When (at what levels of the cost of capital) would choose project A? Cash Flows ($) Project C0 C1 C2 C3 A -90 +60 +50 0 B -100 0 0 +140 Multiple Choice When the cost of capital is less than 9.58% and more than 14.98% When the cost of capital is more than 9.58% and less than 14.98% When the cost of capital is more than 0% and less than 9.58% When the cost of capital is less than 9.58% and mroe than 11.87%Consider the following two mutually exclusive projects: When (at what levels of the cost of capital) would choose project A? Cash Flows ($) Project C0 C1 C2 C3 A -90 +60 +50 0 B -100 0 0 +140 Multiple Choice When the cost of capital is less than 9.58% and mroe than 11.87% When the cost of capital is more than 9.58% and less than 14.98% When the cost of capital is less than 9.58% and more than 14.98% When the cost of capital is more than 0% and less than 9.58%
- You are considering a project X which has cash flows given below: Year 0 Year 1 Year 2 Project X ($7,000) $40,000 ($40,000) Project X has two IRRs, and its cost of capital is 15%. Which of the following statements best describes Project X? (Hint: draw NPV profile) Group of answer choices No matter what its cost of capital is, it should be accepted. No matter what its cost of capital is, it should be rejected. If the cost of capital would be between the two IRRs, it could be accepted. Since both IRRs are greater than its cost of capital, it should be accepted. All of these statements are not consistent with Project X.1. Brown and Company uses the internal rate of return (IRR) method to evaluate capital projects. Brown is considering four independent projects with the following IRRs: Project IRR I 10% II 12% III 14% IV 15% Brown’s cost of capital is 13%. Considering these projects are risker than average, a 1.5% adjustment is made to the cost of capital. Which one of the following project options should Brown accept based on IRR? Group of answer choices Projects III and IV only. Projects I and II only. Projects I, II, III and IV. Project IV only.10. An engineer is comparing three projects with the Incremental ROR method. There are revenue forecasts and cost cash flows. He uses Excel's IRR function to determine the ROR value for each project. Alternative A is 3.5% above MARR, Alternative B is 1.2% below MARR, and Alternative C = 2.4% above MARR. Which alternatives should be included in the incremental ROR analysis? A. He must include alternatives A and C in the Incremental analysis B. He must include alternatives A and B in the Incremental analysis C. He must include alternatives B and C in the Incremental analysis D. Only alternative A should be included in the incremental analysis Please solve max only answer option ASAP in 10 minutes
- Suppose that you could invest in the following projects but have only $24,480 to invest. Which projects would you choose? Project Cost NPV w $ 7,970 $ 3,000 x 10,990 7,530 y 8,500 4,280 z 6,750 3,890 You should invest in project(s)?Consider projects Alpha and Beta: Cash Flows ($) Project C0 C1 C2 IRR (%) Alpha −398,000 259,000 188,991 9 Beta −193,000 140,000 82,000 11 The opportunity cost of capital is 8%. Suppose you can undertake Alpha or Beta, but not both. Use the IRR rule to make the choice. (Hint: What’s the incremental investment in Alpha?) Which project did you choose?Compute the Profitability Index (PI) for each project? Project A Project B Profitability Index (PI) 5- In light of your answers above, suppose that these two projects might be mutually exclusive or independent. According to these two assumptions, fill in the blanks in the table below with the suitable answer: Points Investment Criteria If A and B are mutually exclusive, then I would select If A and B are independent, then I would select PBP NPV IRR PI
