This topic contains a solution. Click here to go to the answer

Author Question: Consider the following two projects: Net Cash Flow Each Period Initial Outlay 1 2 3 4 Project A ... (Read 142 times)

TVarnum

  • Hero Member
  • *****
  • Posts: 548
Consider the following two projects:
 
  Net Cash Flow Each Period
  Initial Outlay 1 2 3 4
  Project A 4,000,000 2,003,000 2,003,000 2,003,000 2,003,000
  Project B 4,000,000 0 0 0 11,000,000
  a. Calculate the net present value of each of the above projects, assuming a 14 percent discount rate.
  b. What is the internal rate of return for each of the above projects?
  c. Compare and explain the conflicting rankings of the NPVs and IRRs obtained in parts a and b above.
  d. If 14 percent is the required rate of return, and these projects are independent, what decision should be
  made?
  e. If 14 percent is the required rate of return, and the projects are mutually exclusive, what decision should be
  made?

Question 2

An ordinary annuity may be defined as:
 
  A) A series of equal payments made at regular intervals that are paid at the beginning of each period.
  B) A series of payments, which may or may not be equal in value, that are received at regular intervals at the end of each period.
  C) A series of equal payments made any time over the course of a year, extending for a period of several years.
  D) Any series of payments that occur in the future.
  E) A series of equal payments made at regular intervals that are received at the end of each period.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

flexer1n1

  • Sr. Member
  • ****
  • Posts: 373
Answer to Question 1

a. NPV of A = 1,836,166 NPV of B = 2,512,883
b. IRR of A = 35.0 IRR of B = 28.78
c. B has more distant cash flows, thus its IRR is less while its NPV is greater. This time disparity is one of IRR's
ranking problems.
d. If these projects are independent, we would accept them both because they each have a positive NPV.
e. If these projects are mutually exclusive, we would select B because it has the highest positive NPV.

Answer to Question 2

E




TVarnum

  • Member
  • Posts: 548
Reply 2 on: Jul 10, 2018
Great answer, keep it coming :)


dawsa925

  • Member
  • Posts: 326
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

Did you know?

A headache when you wake up in the morning is indicative of sinusitis. Other symptoms of sinusitis can include fever, weakness, tiredness, a cough that may be more severe at night, and a runny nose or nasal congestion.

Did you know?

The shortest mature adult human of whom there is independent evidence was Gul Mohammed in India. In 1990, he was measured in New Delhi and stood 22.5 inches tall.

Did you know?

Hypertension is a silent killer because it is deadly and has no significant early symptoms. The danger from hypertension is the extra load on the heart, which can lead to hypertensive heart disease and kidney damage. This occurs without any major symptoms until the high blood pressure becomes extreme. Regular blood pressure checks are an important method of catching hypertension before it can kill you.

Did you know?

The Centers for Disease Control and Prevention (CDC) was originally known as the Communicable Disease Center, which was formed to fight malaria. It was originally headquartered in Atlanta, Georgia, since the Southern states faced the worst threat from malaria.

Did you know?

In 1835 it was discovered that a disease of silkworms known as muscardine could be transferred from one silkworm to another, and was caused by a fungus.

For a complete list of videos, visit our video library