Author Question: Sadik Company is considering Projects S and L, whose cash flows are shown below. These projects are ... (Read 29 times)

tashina2013 · **on:** Aug 7, 2023

Question 1

Rivoli Roofing is considering mutually exclusive Projects A and B, which have the following cash flows:

Year	Project A Cash Flow	Project B Cash Flow
0	–$300	–$420
1	30	110
2	50	80
3	50	100
4	60	60
5	90	60

At what cost of capital would the two projects have the same NPV?

◦

6.60%

◦

7.30%

◦

8.61%

◦

9.54%

Question 2

Sadik Company 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 higher IRR, how much value will be forgone? Note that under some conditions choosing projects on the basis of the IRR will not cause any value to be lost.

WACC:	7%
	0	1	2	3	4
CF_S	–$1,230	$795	$770
CF_L	–$1,230	$420	$420	$420	$420

◦

$4.29

◦

$5.38

◦

$6.10

◦

$7.09

sin · **Reply #1 on:** Aug 7, 2023

A FREE account is required to view all solutions!

Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.

Answer Preview

Only 50% of students answer this correctly