Question 1
Humboldt Inc. is considering a project that has the following cash flow and WACC data. What is the project’s NPV?
| WACC: | 10% | | | | | |
| Year: | 0 | 1 | 2 | 3 | 4 | 5 |
| Cash flows: | –$1,000 | $400 | $400 | $400 | $400 | $400 |
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$507.94
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$510.09
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$516.31
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$520.61
Question 2
In general, where there is a conflict between two mutually exclusive projects, the NPV of a project and its internal rate of return, in terms of making a go/no go decision, the conflict is resolved by which of the following rules?
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Where the NPV method chooses one project but the IRR method chooses the other, the conflict should generally be resolved in favour of the project with the higher MIRR.
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Where the NPV method chooses one project but the IRR method chooses the other, the conflict should generally be resolved in favour of the project with the higher IRR.
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Where the NPV method chooses one project but the IRR method chooses the other, the conflict should generally be resolved in favour of the project with the higher NPV.
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Where the NPV method chooses one project but the IRR method chooses the other, the conflict should generally be resolved in favour of the project with the shorter payback period.
Open, or compound The fracture projects through the skin and there is a possibility of infection or
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