If the opportunity cost of capital is 11%, and you have unlimited access to the capital, which one(s) would you accept? Why did you answer the way you did? Would your response change if the cost of capital is 16%? Why or why not? Suppose that you have limited access to the capital and you need to choose only one project. Which one would you choose and why? The discount rate is still 11%. What is the payback period of each project? Please analyze if, in general, a decision based on payback is consistent with a decision based on NPV. 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 the 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. Project A -5000 +1000 +1000 +3000 0 B -1000 0 +1000 +2000 +3000 C -5000 +1000 +1000 +3000 +5000 I will need full analysis (qualitative examples and references citations and examples of relative current investments of big companies.

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 21P: Your division is considering two investment projects, each of which requires an up-front expenditure...

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If the opportunity cost of capital is 11%, and you have unlimited access to the capital, which one(s) would you accept? Why did you answer the way you did? Would your response change if the cost of capital is 16%? Why or why not?
Suppose that you have limited access to the capital and you need to choose only one project. Which one would you choose and why? The discount rate is still 11%.
What is the payback period of each project? Please analyze if, in general, a decision based on payback is consistent with a decision based on NPV.
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 the 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.

Project

A -5000 +1000 +1000 +3000 0

B -1000 0 +1000 +2000 +3000

C -5000 +1000 +1000 +3000 +5000

I will need full analysis (qualitative examples and references citations and examples of relative current investments of big companies.

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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 the 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.

Project

A -5000 +1000 +1000 +3000 0

B -1000 0 +1000 +2000 +3000

C -5000 +1000 +1000 +3000 +5000

I will need full analysis (qualitative examples and references citations and examples of relative current investments of big companies.

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Project
A	-5000	+1000	+1000	+3000	0
B	-1000	0	+1000	+2000	+3000
C	-5000	+1000	+1000	+3000	+5000