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 < 0. Oe. Project L, because the NPVL > NPVs.

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 < 0. Oe. Project L, because the NPVL > NPVs.

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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Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.
In an unrelated analysis, you have the opportunity to choose between the following two mutually exclusive projects, Project T (which lasts for 2 years) and Project F (which lasts for 4 years): The projects provide a necessary service, so whichever one is selected is expected to be repeated into the foreseeable future. Both projects have a 10% cost of capital. What is each project’s initial NPV without replication? What is each project’s equivalent annual annuity? Apply the replacement chain approach to determine the projects’ extended NPVs. Which project should be chosen? Assume that the cost to replicate Project T in 2 years will increase to $105,000 due to inflation. How should the analysis be handled now, and which project should be chosen?
Project S requires an initial outlay at t = 0 of $16,000, 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 $30,500, and its expected cash flows would be $9,450 per year for 5 years. If both projects have a WACC of 16%, which project would you recommend? Select the correct answer. O a. Project S, because the NPVS > NPVL. O b. Both Projects S and L, because both projects have NPV's > 0. c. Both Projects S and L, because both projects have IRR's > 0. O d. Project L, because the NPVL > NPVS. O e. Neither Project S nor L, because each project's NPV < 0.
Project S requires an initial outlay at t= 0 of $16,000, 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 $27,500, and its expected cash flows would be $10,150 per year for 5 years. If both projects have a WACC of 14%, which project would you recommend? Select the correct answer. Ca. Project S, because the NPVs > NPVL. Ob. Both Projects S and L, because both projects have IRR's > 0. Oc. Both Projects S and L, because both projects have NPV's > 0. Od. Project I because the NPVL > NPVs. Oe. Neither Project S nor L, because each project's NPV < 0.
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.
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.
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.
Project S requires an initial outlay at t = 0 of $14,000, and its expected cash flows would be $6,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $26,500, and its expected cash flows would be $7,600 per year for 5 years. If both projects have a WACC of 14%, 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.
9. Project S requires an initial outlay at t = 0 of $19,000, 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 $28,000, and its expected cash flows would be $12,150 per year for 5 years. If both projects have a WACC of 13%, which project would you recommend? Select the correct answer. a. Project S, because the NPVS > NPVL. b. Neither Project S nor L, because each project's NPV < 0. c. Both Projects S and L, because both projects have IRR's > 0. d. Both Projects S and L, because both projects have NPV's > 0. e. Project L, because the NPVL > NPVS. 10
eBook Project S costs $14,000 and its expected cash flows would be $6,500 per year for 5 years. Mutually exclusive Project L costs $30,000 and its expected cash flows would be $10,150 per year for 5 years. If both projects have a WACC of 16%, which project would you recommend? Select the correct answer. Oa. Project L, since the NPVL > NPVS. Ob. Both Projects S and L, since both projects have NPV's > 0. Oc. Project S, since the NPVS > NPVL. Od. Both Projects S and L, since both projects have IRR's > 0. Oe. Neither Project S nor L, since each project's NPV < 0.
Project H requires an initial investment of 100,000 dollars and it produces annual cash flows of 50,000, 40,000, and 30,000. Project T requires an initial investment of 100,000 dollars and it produces annual cash flows of 30,000, 40,000, and 50,000. If the required rate of return is greater than 0% and the projects are mutually exclusive: Select one: a. H and T are equally attractive. b. H will always be preferable to T. c. The project rankings will change with different discount rates. d. T will always be preferable to H.
Which mutually exclusive project would you select, if both are priced at $1,000 and your required return is 15%: Project A with three annual cash flows of $1,000; or Project B, with 3 years of zero cash flow followed by 3 years of $1,500 annually?