Author Question: Yonan Inc. is considering Projects S and L, whose cash flows are shown below. These projects are ... (Read 97 times)

Caileynorton · **on:** Aug 7, 2023

Question 1

With respect to the required level of capital budget analysis, _____would likely require the least level of investigation while ____ would likely require the greatest level of analysis.

1.	contraction decisions
2.	merger decisions
3.	replacement needs to continue profitable operations
4.	expansion into existing products or markets

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4,1

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3,1

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3,2

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4,2

Question 2

Yonan Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the shorter payback, some value may be foregone. How much value will be lost in this instance? Note that under some conditions choosing projects on the basis of the shorter payback will not cause value to be lost.

WACC:	9%
	0	1	2	3	4
CF_S	–$1,200	$600	$900	$0	$0
CF_L	–$2,400	$900	$800	$400	$1,000

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$18.36

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$10.42

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$13.79

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$15.16

nikspatel037 · **Reply #1 on:** Aug 7, 2023

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