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Author Question: Anderson Associates is considering two mutually exclusive projects that have the following cash ... (Read 17 times)

moore.cailinf

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on: Aug 7, 2023

Question 1

Adler Enterprises is considering a project that has the following cash flow and WACC data. What is the project’s NPV?

WACC:11%   
Year:

0

1

2

3

Cash flows:

–$1,000

$480

$490

$500


◦

$182.37


◦

$195.72


◦

$199.50


◦

$204.82



Question 2

Anderson Associates is considering two mutually exclusive projects that have the following cash flows:

​

​

​

Project A

Project B

Year

Cash Flow

Cash Flow

0

–$12,000

–$9,000

1

2,000

8,000

2

3,000

1,000

3

7,000

2,000

4

9,000

3,000

​

​

​

At what cost of capital do the two projects have the same NPV? (That is, what is the crossover rate?)


◦

15.07%


◦

15.86%


◦

16.03%


◦

16.95%

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by moore.cailinf on Aug 7, 2023

lola.jashay

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Reply #1 on: Aug 7, 2023
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moore.cailinf

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Reply 2 on: Aug 7, 2023
Great answer, keep it coming :)

marict

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Reply 3 on: Yesterday
Wow, this really help

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