A project has an up-front cost of sh.1000, 000. The project's WACC is 12% and its net present value is sh.100, 000. Which of the following statements is most correct? Select one: A. The project should be rejected since its return is less than the WACC B. The project's internal rate of return is greater than 12 percent C. The project's modified internal rate of return is less than 12 percent D. All of the statements above are correct E. None of the statements above is correct

A project has an up-front cost of sh.1000, 000. The project's WACC is 12% and its net present value is sh.100, 000. Which of the following statements is most correct? Select one: A. The project should be rejected since its return is less than the WACC B. The project's internal rate of return is greater than 12 percent C. The project's modified internal rate of return is less than 12 percent D. All of the statements above are correct E. None of the statements above is correct

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 2P

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Project A has an internal rate of return (IRR) of 15 percent. Project B has an IRR of 14 percent. Both projects have a required return of 12 percent. Which of the following statements is most correct? (Assume the projects are not mutually exclusive.) OA. Both projects have a negative net present value (NPV). OB. Both projects should be accepted because the IRR is greater than the required return. OC. If the required return were less than 12 percent. Project 8 would have a higher IRR than Project A OD. Both projects should be rejected.
Projects A and B are mutually exclusive. If project A, the larger project, has an approximate ERR of 20 percent and project B has an approximate ERR of 13 percent, which project is better if MARR=10 percent? O A The incremental ERR method is required to determine the better project. Neither A nor B is valid. B * For our purposes, a project is valid if its internal rate of return (IRR) is less than MARR. equal to or larger than MARR. less than 0 percent. larger than MARR.
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If the required rate of return of a project is 17% and the IRR rate is calculated as 15%. Identify from the following the correct decision statement. a. Yes, we can Accept the project b. None of the options c. Yes, we can accept the project if required rate change to 14% d. No, we need to reject the project
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The following information on two mutually exclusive projects is given below:n Project A Project B0 -3,000 -5,0001 1,350 1,3502 1,800 1,8003 1,500 5,406IRR 25% 25%Which of the following statements is correct?(a) Since the two projects have the same rate of return, they are indifferent.(b) Project A would be a better choice, as the required investment is smaller withthe same rate of return.(c) Project B would be a better choice as long as the investor’s MARR is lessthan 25%.(d) Project B is a better choice regardless of the investor’s MARR
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Assume that there are two competing projects, A and B. Project A has an NPV of $1,000 and an IRR of 15%. Project B has an NPV of $800 and an IRR of 20%. Which of the following is true? Project A should be chosen because it has a higher NPV Project B should be chosen because it has a higher IRR It is not possible to us NPV or IRR to choose between the two projects Neither projects should be chosen All of these
Project 1 has a return, I, of 8.4% and Project 2 has a return rate, I, of 8.1%. The incremental rate of return of Project 2 (higher first cost) compared to Project 1 (lower first cost) is 7.8%. Which project(s) should be selected of the projects are independent and the MARR= 8%?
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A project has an upfront cost of $100,000. The projects WACC is 12% and it’s net present value is $10,000. Which of the following statements is most correct? The project should be rejected since it’s return is less than the WACC The projects internal rate of return is greater than 12% The projects modified internal rate of return is less than 12% All of the above None of the above
Use the NPV method to determine whether Kyler Products should invest in the following projects: • Project A costs $275,000 and offers seven annual net cash inflows of $58,000. Kyler Products requires an annual return of 12% on projects like A. • Project B costs $390,000 and offers ten annual net cash inflows of $70,000. Kyler Products demands an annual return of 14% on investments of this nature. (Click the icon to view the present value annuity table.) (Click the icon to view the present value table.) F (Click the icon to view the future value table.) (Click the icon to view the future value annuity table.) Requirement What is the NPV of each project? What is the maximum acceptable price to pay for each project? C Calculate the NPV of each project. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for negative net present values.) The NPV of Project A is