Suppose your firm is evaluating four potential new investments. You calculate that these projects, W, X, Y, and Z, have the NPV and IRR figures given below: Project W: NPV = $7,000 IRR = 13% Project X: NPV = $-4,000 IRR = 15% Project Y: NPV = $5,000 IRR = 10% Project Z: NPV = $800 IRR = 18% a) Which project(s) should be accepted if they are independent? Clearly explain your reasoning. b) Which project(s) should be accepted if they are mutually exclusive? Clearly explain your reasoning.
Suppose your firm is evaluating four potential new investments. You calculate that these projects, W, X, Y, and Z, have the NPV and IRR figures given below: Project W: NPV = $7,000 IRR = 13% Project X: NPV = $-4,000 IRR = 15% Project Y: NPV = $5,000 IRR = 10% Project Z: NPV = $800 IRR = 18% a) Which project(s) should be accepted if they are independent? Clearly explain your reasoning. b) Which project(s) should be accepted if they are mutually exclusive? Clearly explain your reasoning.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 7P
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Suppose your firm is evaluating four potential new investments. You calculate that these projects, W, X, Y, and Z,
have the
Project W: NPV = $7,000 IRR = 13%
Project X: NPV = $-4,000 IRR = 15%
Project Y: NPV = $5,000 IRR = 10%
Project Z: NPV = $800 IRR = 18%
a) Which project(s) should be accepted if they are independent? Clearly explain your reasoning.
b) Which project(s) should be accepted if they are mutually exclusive? Clearly explain your reasoning.
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