You are considering the following two projects and can take only one. Your cost of capital is 11.2%. The cash flows for the two projects are as follows ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A -100 26 28 42 48 B-100 48 42 28 19 a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of capital are you indifferent between the two projects? d. What should you do?

You are considering the following two projects and can take only one. Your cost of capital is 11.2%. The cash flows for the two projects are as follows ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A -100 26 28 42 48 B-100 48 42 28 19 a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of capital are you indifferent between the two projects? d. What should you do?

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Description: You are considering the following two projects and can take only one. Your cost of capital is 11.2%. The cash flows for thetwo projects are as follows ($ million):Project Year 0 Year 1 Year 2 Year 3 Year 4A -100 26 28 42 48B-100 48 42 28 19a. What i

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 13P

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You are considering the following two projects and can take only one. Your cost of capital is 10.6%. The cash flows for the two projects a as follows ($ million): a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of capital are you indifferent between the two projects? d. What should you do? Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Project Year 0 Year 1 Year 2 A - $100 $24 $30 B - $100 $48 $41 Year 3 $41 $30 Year 4 $48 $18 — X
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