BREWER ND LL INTRO MGRL ACTG CON+ AC
19th Edition
ISBN: 9781260711851
Author: BREWER
Publisher: McGraw-Hill Publishing Co.
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Textbook Question
Chapter 12, Problem 14E
Comparison of Projects Using
The company’s discount rate is 18%.
Required:
1. Compute the net present value of Project X.
2. Compute the net present value of Project Y.
3. Which project would you recommend the company accept?
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Students have asked these similar questions
You are choosing between two projects. The cash flows for the projects are given in the following table ($ million):
a. What are the IRRs of the two projects?
b. If your discount rate is 4.7%, what are the NPVs of the two projects?
c. Why do IRR and NPV rank the two projects differently?
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Year 0
Project
A
Year 1
-
-$51
$27
B
- $101
$22
Year 2
$21
$42
Year 3
$20
Year 4
$13
$51
$59
-
☑
Piercy, LLC, has identified the following two mutually exclusive projects:
Year
Cash Flow (A)
Cash Flow (B)
0
-$56,000
-$56000
1
32,000
19,400
2
26,000
23,400
3
19,000
28,000
4
13,200
25,400
Over what range of Discount rates would you choose Project A? Project B?
(Please list percentages rounded to 2 decimal places. Hint: The answer is not the same as the IRR.)
Project A ____________%
Project B ____________%
At what discount rate would you be indifferent between these two projects? ____________%
You are choosing between two projects. The cash flows for the projects are given in the following table ($ million):
Year 2
Year 0
- $51
- $101
$21
$42
Project
A
B
Year 1
$25
$20
a. What are the IRRs of the two projects?
b. If your discount rate is 4.6%, what are the NPVs of the two projects?
c. Why do IRR and NPV rank the two projects differently?
%. (Round to one decimal place.)
a. What are the IRRs of the two projects?
The IRR for project A is
The IRR for project B is
%. (Round to one decimal place.)
b. If your discount rate is 4.6%, what are the NPVs of the two projects?
If your discount rate is 4.6%, the NPV for project A is $
C
Year 3
$21
$50
Year 4
$15
$59
million. (Round to two decimal places.)
million. (Round to two decimal places.)
If your discount rate is 4.6%, the NPV for project B is $
c. Why do IRR and NPV rank the two projects differently?
(Select from the drop-down menus.)
is measuring return on
NPV and IRR rank the two projects differently because they are measuring…
Chapter 12 Solutions
BREWER ND LL INTRO MGRL ACTG CON+ AC
Ch. 12.A - Basic Present Value Concepts Annual cash inflows...Ch. 12.A - Basic Present value Concepts Julie has just...Ch. 12.A - Prob. 3ECh. 12.A - Prob. 4ECh. 12.A - Basic Present Value Concepts The Atlantic Medical...Ch. 12.A - Prob. 6ECh. 12 - What is the difference between capital budgeting...Ch. 12 - Prob. 2QCh. 12 - Prob. 3QCh. 12 - Prob. 4Q
Ch. 12 - Why are discounted cash flow methods of making...Ch. 12 - Prob. 6QCh. 12 - Identify two simplifying assumptions associated...Ch. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - Prob. 10QCh. 12 - Prob. 11QCh. 12 - Prob. 12QCh. 12 - How is the project profitability index computed,...Ch. 12 - Prob. 14QCh. 12 - Prob. 15QCh. 12 - Prob. 1AECh. 12 - The Excel worksheet form that appears below is to...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 3F15Ch. 12 - Prob. 4F15Ch. 12 - Prob. 5F15Ch. 12 - Prob. 6F15Ch. 12 - Prob. 7F15Ch. 12 - Prob. 8F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 11F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Prob. 13F15Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Cardinal Company is considering a five-year...Ch. 12 - Payback Method The management of Unter...Ch. 12 - Net Present Value Analysis The management of...Ch. 12 - Internal Rate of Return Wendell’s Donut Shoppe is...Ch. 12 - Uncertain Future Cash Flows Lukow Products is...Ch. 12 - Prob. 5ECh. 12 - Simple Rate of Return Method The management of...Ch. 12 - Prob. 7ECh. 12 - Payback Period and Simple Rate of Return Nicks...Ch. 12 - Prob. 9ECh. 12 - Prob. 10ECh. 12 - Preference Ranking of Investment Projects Oxford...Ch. 12 - Prob. 12ECh. 12 - Payback Period and Simple Rate of Return...Ch. 12 - Comparison of Projects Using Net Present Value...Ch. 12 - Internal Rate of Return and Net Present Value...Ch. 12 - Net Present Value Analysis Windhoek Mines, Ltd.,...Ch. 12 - Net Present Value Analysis; Internal Rate of...Ch. 12 - Net Present Value Analysis Oakmont Company has an...Ch. 12 - Simple Rate of Return; Payback Period Paul Swanson...Ch. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - Comprehensive Problem - Lou Barlow, a divisional...Ch. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26PCh. 12 - Net Present Value Analysis In five years, Kent...Ch. 12 - Prob. 28PCh. 12 - Prob. 29P
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