Author Question: McCall Manufacturing has a WACC of 13%. The firm is considering two normal, equally risky, mutually ... (Read 47 times)

majortom123 · **on:** Aug 7, 2023

Question 1

Levin Company is considering a project that has the following cash flow data. What is the project’s IRR?

Year:	0	1	2	3	4
Cash flows:	–$1,000	$380	$380	$380	$380

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15.94%

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17.71%

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18.68%

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19.14%

Question 2

McCall Manufacturing has a WACC of 13%. The firm is considering two normal, equally risky, mutually exclusive, but not repeatable projects. The two projects have the same investment costs, but Project A has an IRR of 18%, while Project B has an IRR of 24%. Which of the following statements is correct?

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Each project must have a negative NPV.

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Since the projects are mutually exclusive, the firm should always select Project B.

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If the crossover rate is 10%, Project B will have the lower NPV.

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If the crossover rate is 10%, Project A will have a lower NPV than Project B.

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

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