Consider projects A and B: Cash Flows (dollars) Project CO C1 C2 22,600 22,600 +$6,703 35,000 35,000 +7,938 NPV at 11% A -32,000 B -52,000 a. Calculate IRRs for A and B. b. Which project does the IRR rule suggest is best?
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- Start with the partial model in the file Ch10 P23 Build a Model.xlsx on the textbooks Web site. Gardial Fisheries is considering two mutually exclusive investments. The projects expected net cash flows are as follows: a. If each projects cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice? b. Construct NPV profiles for Projects A and B. c. What is each projects IRR? d. What is the crossover rate, and what is its significance? e. What is each projects MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Project Bs life.) f. What is the regular payback period for these two projects? g. At a cost of capital of 12%, what is the discounted payback period for these two projects? h. What is the profitability index for each project if the cost of capital is 12%?Consider two mutually exclusive projects A and B: Cash Flows (dollars) Project Co A -39,500 B -59,500 C₁ 28,600 42,500 C₂ NPV at 11% 28,600 +$ 9,478 42,500 +13,282 a. Calculate IRRS for A and B. Note: Do not round intermediate calculations. Enter your answers as a perc Project A B IRR % % b. Which project does the IRR rule suggest is best? Project A Project B c. Which project is really best? Project A Project B PConsider the following projects: Cash Flows ($) Co Project D E -11, 100 -21, 100 C₁ 22, 200 34,500 Assume that the projects are mutually exclusive and that the opportunity cost of capital is 11%. a. Calculate the profitability index for each project. b-1. Calculate the profitability-index using the incremental cash flows. b-2. Which project should you choose?
- QUESTION 3 If the cash flows for Project M are CO= -2,000; C1 = +400; C2 = +1,400; and C3= +1,300, calculate the IRR for the project. Please input the percentage format for your answer. And there is no need to put the percentage sign (%).Consider projects A and B: Cash Flows (dollars) Project A Co -30,500 C1 C2 21,400 21,400 NPV at 11% +$6,148.00 B -50,500 33,500 33,500 + 6,869.53 a. Calculate IRRS for A and B. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project A B IRR % % b. Which project does the IRR rule suggest is best? O Project A ○ Project B c. Which project is really best? ○ Project A O Project B kThe cash flows for two mutually exclusive projects are given as follows: Co C1 C2 C3 Project +7,800 +7,800 +7,800 -20,000 +25,000 Y -20,000 a. Which project would you choose using the NPV method if the discount rate is 5%? b. Which project would you choose using the IRR method?
- onsider the following cash flows: C0=-$42 C1=+$38 C2=+$38 C3=+$38 C4=-$76 a. Which two of the following rates are the IRRs of this project?11. IRR rule (S5.3) Consider the following two mutually exclusive projects: Cash flows ($) Project A B Co -50 -50 C₁ +60 0 C₂ +60 0 0 +140 Page 142 a. Calculate the NPV of each project for discount rates of 0%, 10%, and 20%. Plot these on a graph with NPV on the vertical axis and discount rate on the horizontal axis. b. What is the approximate IRR for each project? c. In what circumstances should the company accept project A? d. Calculate the NPV of the incremental investment (B – A) for discount rates of 0%, 10%, and 20%. Plot these on your graph. Show that the circumstances in which you would accept A are also those in which the IRR on the incremental investment is less than the opportunity cost of capital.Consider the following two mutually exclusive projects:Year Cash Flow (X) Cash Flow (Y)0 -$365,000 -$38,0001 25,000 16,0002 65,000 12,0003 65,000 17,0004 425,000 15,000Whichever project you choose, if any, you require a 13 percent return on your investment. i. Which investment will you choose if you use the payback decision criteria? Justify your answer.ii. Which investment will you choose if you use the NPV decision criteria? Justify your answer.iii. Which project will you choose ultimately based on your answers above?
- Consider the following two projects: Projec Year 0 Year 1 Year 2 Year 3 Year 4 Cash Cash Cash Cash Cash Discount Flow Flow Flow Flow Flow Rate A -100 40 50 60 N/A 0.11 -73 30 30 30 30 0.11 The net present value (NPV) of project As closest to Select one: a. 51.2 b. 25.6 O c. 20.5 Od. 22.5Project X Project Y Year Cash Flow Cash Flow 0 -$1000 -$1000 1 100 400 2 300 400 3 500 400 4 800 400 The cost of capital is 5 percent. 1. What is each project’s NPV? Which project would you choose based on NPV rule? 2. What is each project’s IRR? Which project would you choose based on IRR rule? 3. Why IRR rule and NPV rule lead to different decisions? Which rule is more appropriate to evaluate mutually exclusive projects? Why?onsider the following projects: Project Cash Flows ($) C0�0 C1�1 C2�2 C3�3 C4�4 C5�5 A −2,600 2,600 0 0 0 0 B −5,200 2,600 2,600 5,600 2,600 2,600 C −6,500 2,600 2,500 0 2,600 2,600 If the opportunity cost of capital is 10%, which project(s) have a positive NPV? Calculate the payback period for each project. Which project(s) would a firm using the payback rule accept if the cutoff period is three years?
