Walmart is considering two mutually exclusive projects. The firm, which has a 12% cost of capital, has estimated its cash flows as shown in the following table. a) Calculate the NPV of each project, and assess its acceptability. b). Calculate the IRR for each project, and assess its acceptability.

Walmart is considering two mutually exclusive projects. The firm, which has a 12% cost of capital, has estimated its cash flows as shown in the following table. a) Calculate the NPV of each project, and assess its acceptability. b). Calculate the IRR for each project, and assess its acceptability.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 2BE

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Walmart is considering two mutually exclusive projects. The firm, which has a 12% cost of capital, has estimated its cash flows as shown in the following table.

a) Calculate the NPV of each project, and assess its acceptability.

b). Calculate the IRR for each project, and assess its acceptability.

Project A
Project B
Initial investment (CF) $130,000
$85,000
Year (t)
Cash inflows (CF)
$25,000 . $40,000
35,000
45,000
35,000
30,000
2
3
4
50,000
10,000
5
55,000
5,000

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