Siegel Industries is considering two capital budgeting projects.  Project A requires an initial investment of $48,000.  It is expected to produce net annual cash flows of $8,000.  Project B requires an initial investment of $75,000 and is expected to produce net annual cash flows of $12,000.  Using the cash payback technique to evaluate the two projects, Siegel should accept: A. Project A because it has a shorter cash payback period. B. Project B because it produces a larger net annual cash flow. C. Project B because it has a shorter cash payback period. D. Project A because it requires a smaller initial investment.

Goergen Corporation is considering a capital budgeting project that would require an initial investment of $700,000. The investment would generate annual cash inflows of $267,000 for the life of the project, which is 4 years. The company's discount rate is 10%. The net present value of the project is closest to: Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice $368,000 $700,000 $846,123 $146,123

Falcon Freight is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,600,000. Falcon Freight has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Falcon Freight’s WACC is 9%, and project Delta has the same risk as the firm’s average project. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $375,000 Year 2 $500,000 Year 3 $425,000 Year 4 $500,000 Which of the following is the correct calculation of project Delta’s IRR? 4.01% 5.19% 4.25% 4.72% If this is an independent project, the IRR method states that the firm should . If the project’s cost of capital were to increase, how would that affect the IRR? The IRR would increase.…

The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,400,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Llama Mining Company’s WACC is 7%, and project Delta has the same risk as the firm’s average project.   The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $300,000 Year 2 $425,000 Year 3 $400,000 Year 4 $425,000   Q1. Which of the following is the correct calculation of project Delta’s…