Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required
Time | 0 | 1 | 2 | 3 |
---|---|---|---|---|
Project A Cash Flow | −1,000 | 300 | 400 | 700 |
Project B Cash Flow | −500 | 200 | 400 | 300 |
Use the IRR decision rule to evaluate these projects; which one(s) should be accepted or rejected?
Multiple Choice
Accept A, reject B
Accept both A and B
Accept neither A nor B
Reject A, accept B
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 3 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 2.0 and 3.0 years, respectively. Time: 0 1 2 3 4 5 6 Cash flow: -$7,300 $1,160 $2,360 $1,560 $1,560 $1,360 $1,160 Use the Pl decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) PI 0.94 Should it be accepted or rejected? O rejected O acceptedarrow_forwardSuppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time Project A Cash Flow Project B Cash Flow Use the payback decision rule to evaluate these projects, which one(s) should it be accepted or rejected? Multiple Choice 0 -35,000 -45,000 1 25,000 25,000 2 45,000 5,000 3 16,000 65,000arrow_forwardSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3.0 and 3.5 years, respectively. Time: Cash flow: 0 1 2 -$241,000 $66,400 $84,600 Payback Use the payback decision rule to evaluate this project. Note: Round your answer to 2 decimal places. years 4 3 $141,600 $122,600 Should the project be accepted or rejected? (Click to select) 5 $81,800arrow_forward
- Typed and correct answer please. I will rate accordinglyarrow_forwardSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: 0 1 2 3 4 5 6 Cash flow: -$4,900 $1,260 $2,460 $1,660 $1,660 $ 1,460 $1,260 Use the NPV decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively. Time: 0 1 2 3 4 5 Cash flow -$228,000 $65, 100 $83,300 $140, 300 $121,300 $80, 500 Use the discounted payback decision rule to evaluate this project. (Do not round intermediate…arrow_forwardTyped and correct answer please. I ll ratearrow_forward
- Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: Cash flow: 0 2 3 4 5 -$5,400 $1,600 $2,800 $2,000 $2,000 $1,800 Use the MIRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) 6 $1,600arrow_forwardWhich of the following describes the NPV decision rule? Accept if the cost of the project is recouped within 3 years. Accept if the PV of the cash inflows of the project divided by the absolute value of the cost of the project is greater than one. Accept if the PV of the cash inflows from the project minus the cost of the project is greater than zero Accept if the average net income from the project divided by the average book value is greater than the target required Accept if the rate of return earned on the project is greater than the required return for the project.arrow_forwardSuppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time 1 2 3 Project A Cash Flow Project B Cash Flow -25,000 15,000 35,000 6,000 -35,000 15,000 25,000 55,000 Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected? Multiple Choice Accept A, reject B Accept neither A nor B Accept both A and B Reject A, accept Barrow_forward
- consider the following two investments with the cashfow as shown. given the project are mutually exclusive, use Incremental-Investement Analysis to determine which of the two projects you should select. Given that the MARR required by management is 12%.arrow_forwardVijay shiyalarrow_forwardSuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: Cash flow: 0 4 -$5,000 $1,200 $2,400 $1,600 $1,600 $1,400 Use the IRR decision rule to evaluate this project. (Do not round intermediate calculations and round your final onswer to 2 decimal places.) Answer is complete but not entirely correct. IRR 6 $1,200 14.00 %arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education