Reject A, accept B and Accept A, reject B are both incorrect. 云Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects ofboth of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years,respectively.TimeProject A Cash FlowProject B Cash Flow000'917,000000'98000'98-000'97000'97000'99000'9-Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?Multiple ChoiceReject A, accept BAccept A, reject BAccept both A and B10 of 18MacBook AirDDF10%23F8F5659324&%23%24 Project B Cash Flow000'9000'99Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?Multiple ChoiceReject A, accept BAccept A, reject BAccept both A and BAccept neither A nor B< Prev.10 of 18MacBook AirD08

Given: Year Project A Project B 0 -$36,000 -$46,000 1 $26,000 $26,000 2 $46,000 $36,000 3…

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time Project A Cash Flow Project B Cash Flow 000'9E- 000'97 000'9 000'LT 000'9t- 000'97 000'98 000'99 Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected? Multiple Choice Reject A, accept B Accept A, reject B Accept both A and B

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time Project A Cash Flow Project B Cash Flow 000'9E- 000'97 000'9 000'LT 000'9t- 000'97 000'98 000'99 Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected? Multiple Choice Reject A, accept B Accept A, reject B Accept both A and B

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows

Section: Chapter Questions

Problem 23SP: Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site....

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Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?
Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site. Gardial Fisheries is considering two mutually exclusive investments. The projects expected net cash flows are as follows: a. If each projects cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? b. Construct NPV profiles for Projects A and B. c. What is each projects IRR? d. What is the crossover rate, and what is its significance? e. What is each projects MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Project Bs life.) f. What is the regular payback period for these two projects? g. At a cost of capital of 12%, what is the discounted payback period for these two projects? h. What is the profitability index for each project if the cost of capital is 12%?
Giorgio Co. is looking at an investment project with an internal rate of return of 10.8%. The initial outlay for the investment is $90,000. The hurdle rate or minimum acceptable rate of return is 10.2%.
Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a net cash inflow one year from now of 810,000. Assume the cost of capital is 10 percent. Required: 1. Break the 810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?