Chapter 10, Problem 11MC

Give typing answer with explanation and conclusion Project S requires an initial outlay at t = 0 of $13,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $28,000, and its expected cash flows would be $13,850 per year for 5 years. If both projects have a WACC of 15%, which project would you recommend? Select the correct answer. a. Neither Project S nor L, because each project's NPV < 0. b. Both Projects S and L, because both projects have NPV's > 0. c. Project S, because the NPVS > NPVL. d. Both Projects S and L, because both projects have IRR's > 0. e. Project L, because the NPVL > NPVS.

4. You have to select only one of the following projects (ie. They are mutually exclusive.) Project #1 is 4 years long and has an NPV of $140,000. Project #2 is 6 years long and has an NPV of $180,000. The required rate of return is 10%. Which project should you take using the EAA approach?

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?

The following information is available on two mutually exclusive projects. All numbers are in ‘000s. Project             Year 0             Year 1             Year 2             Year 3             Year 4 A                     $700                $300                $300                $400                $400 B                     $700                $600                $300                $200                $100   a: If the minimum acceptable rate of return is 10%, which project should be selected using the Net Present Value (NPV) method? Which project should be selected if the Internal Rate of Return (IRR) method is used?   b: At what cross‐over rate would the firm be indifferent between the two projects? What is the NPV for both projects at the crossover rate?   c: How much should cash flow in year 3 for project B increase or decrease in order for NPV(B) to be equal to NPV(A)?

Project S requires an initial outlay at t = 0 of $19,000, and its expected cash flows would be $5,500 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $37,000, and its expected cash flows would be $10,800 per year for 5 years. If both projects have a WACC of 13%, which project would you recommend? Select the correct answer.   a. Project L, because the NPVL > NPVS.     b. Neither Project S nor L, because each project's NPV < 0.     c. Both Projects S and L, because both projects have NPV's > 0.     d. Both Projects S and L, because both projects have IRR's > 0.     e. Project S, because the NPVS > NPVL.

Project S requires an initial outlay at t=0 of $12,000, and its expected cash flows would be $4,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $38,500, and its expected cash flows would be $9,200 per year for 5 years. If both projects have a WACC of 15%, which project would you recommend? Select the correct answer. Oa. Both Projects S and L, because both projects have NPV's > 0. Ob. Project S, because the NPVs > NPVL Oc. Both Projects S and L, because both projects have IRR's > 0. Od. Neither Project S nor L, because each project's NPV NPVs.

a) Calculate the payback period for each project. The maximum allowable payback period setby the company for all projects is 3 years. b) Calculate the net present value (NPV) for each project c) Calculate the profitability index (PI) for each project  d) Calculate the internal rate of return (IRR) for each project. e) Based on the answer in (a) – (d), explain briefly which project should be accepted. f) If the project is independent project, how would your answer change in part (e)     Note: I need only e,f no question answer. only e and f

Project Q requires an initial outlay at t = 0 of $20,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $26,000, and its expected cash flows would be $13,600 per year for 5 years. If both projects have a WACC of 16%, which project would you recommend? Select the correct answer.  a. Neither Project S nor L, since each project's NPV < 0.   b. Project S, since the NPVS > NPVL.   c. Project L, since the NPVL > NPVS.   d. Both Projects S and L, since both projects have IRR's > 0.   e. Both Projects S and L, since both projects have NPV's > 0.

a) Calculate the payback period for each project. The maximum allowable payback period setby the company for all projects is 3 years. b) Calculate the net present value (NPV) for each project c) Calculate the profitability index (PI) for each project  d) Calculate the internal rate of return (IRR) for each project. e) Based on the answer in (a) – (d), explain briefly which project should be accepted. f) If the project is independent project, how would your answer change in part (e)     Note: 1. I need only e,f no question answer. only e and f  2. No need excel formula