Management is evaluating two mutually exclusive projects, Thing 1 and thing 2, with the following cash flows: Year. Thing 1. Thing 2 1. -$10, 000. -$10,000 2. 3,293 0 3. 3,293. 0 4. 3,293. 0 5. 3,293. 0 a. If the required rate on return of both projects is 5%, which project, if either should management choose? Why? b. If the required rate on return of both projects is 8%, which project, if either, should management choose? Why? c. If the required rate of return on both projects is 11%, which project, if either should management choose? Why?
Management is evaluating two mutually exclusive projects, Thing 1 and thing 2, with the following cash flows:
Year. Thing 1. Thing 2
1. -$10, 000. -$10,000
2. 3,293 0
3. 3,293. 0
4. 3,293. 0
5. 3,293. 0
a. If the required rate on return of both projects is 5%, which project, if either should management choose? Why?
b. If the required rate on return of both projects is 8%, which project, if either, should management choose? Why?
c. If the required
d. If the required rate of return on both projects is 14% which project, if either should management choose? Why?
e. On a graph, draw the investment profiles of Thing 1 and Thing 2. Indicate the following items:
- crossover discount rate
-
- NPV of Thing 2 if the required rate of return 5%
-
- IRR of Thing 2
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