The following net cash flows relate to two projects: (i) Calculate the NPVs for each project, assuming 10% cost of capital. (ii) Assuming that the two projects are independent, would you accept them if the cost of capital is 15%? (iii) What is the IRR of each project? (iv) Which of the two projects would you prefer if they are mutually exclusive, given a 15% discount rate? NET CASH FLOW (IN $1,000) Year 0 1 2 3 4 5 6 Project A -60 20 20 20 20 20 20 Project B -72 45 22 20 13 13 13

The following net cash flows relate to two projects: (i) Calculate the NPVs for each project, assuming 10% cost of capital. (ii) Assuming that the two projects are independent, would you accept them if the cost of capital is 15%? (iii) What is the IRR of each project? (iv) Which of the two projects would you prefer if they are mutually exclusive, given a 15% discount rate? NET CASH FLOW (IN $1,000) Year 0 1 2 3 4 5 6 Project A -60 20 20 20 20 20 20 Project B -72 45 22 20 13 13 13

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 10P: Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year...

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