Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Textbook Question
Chapter 12, Problem 7P
Your division is considering two investment projects, each of which requires an up-front expenditure of $15 million. You estimate that the investments will produce the following net cash flows:
- a. What are the two projects’
net present values , assuming the cost of capital is 5%? 10%? 15%? - b. What are the two projects’ IRRs at these same costs of capital?
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You are considering the following two projects and can take only one. Your cost of capital is 10.6%. The cash flows for the two projects a
as follows ($ 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
$18
—
X
You are considering the following two projects and can take only one. Your cost of capital is 10.7%. The cash flows for the two projects are as follows ($
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?
a. What is the IRR of each project?
The IRR for project A is %. (Round to one decimal place.)
Data table
D
(Click on the following icon in order to copy its contents into a spreadsheet)
Project
A
Year 0
-$100
B
-$100
Year 1
$22
$49
Year 2
$31
$39
Print
Done
Year 3
Year 4
$39
$49
$31
$21
-
Chapter 12 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 12 - What types of projects require the least detailed...Ch. 12 - Prob. 3QCh. 12 - Prob. 4QCh. 12 - Prob. 5QCh. 12 - A project has an initial cost of 40,000, expected...Ch. 12 - IRR Refer to Problem 12-1. What is the projects...Ch. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 6P
Ch. 12 - Your division is considering two investment...Ch. 12 - Edelman Engineering is considering including two...Ch. 12 - Prob. 9PCh. 12 - Project S has a cost of $10,000 and is expected to...Ch. 12 - Prob. 11PCh. 12 - After discovering a new gold vein in the Colorado...Ch. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - The Pinkerton Publishing Company is considering...Ch. 12 - Shao Airlines is considering the purchase of two...Ch. 12 - The Perez Company has the opportunity to invest in...Ch. 12 - Filkins Fabric Company is considering the...Ch. 12 - The Ulmer Uranium Company is deciding whether or...Ch. 12 - The Aubey Coffee Company is evaluating the...Ch. 12 - Your division is considering two investment...Ch. 12 - The Scampini Supplies Company recently purchased a...Ch. 12 - You have just graduated from the MBA program of a...Ch. 12 - Prob. 2MCCh. 12 - Define the term “net present value (NPV).” What is...Ch. 12 - Prob. 4MCCh. 12 - Prob. 5MCCh. 12 - What is the underlying cause of ranking conflicts...Ch. 12 - Prob. 7MCCh. 12 - Prob. 8MCCh. 12 - Prob. 9MCCh. 12 - Prob. 10MCCh. 12 - In an unrelated analysis, you have the opportunity...Ch. 12 - Prob. 12MC
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