Question
1-Project A costs $100,000 upfront and has a NPV of $10,000. Project B costs $150,000 upfront and has a NPV of $11,000. Which project do
1-Project A costs $100,000 upfront and has a NPV of $10,000. Project B costs $150,000 upfront and has a NPV of $11,000. Which project do you choose if they are mutually exclusive? Which project or projects do you choose if they are independent and the company has $250,000 to spend on capital budgeting projects?
2-Project A is as follows: initial cost of $100,000 and annual cash flows of $25,000 per year for seven years.
Project B is as follows: initial cost of $100,000 and cash flow of $20,000 per year for 8 years.
What are the payback periods of projects A and B?
3-The IRR of project X is 18%. The IRR of project Y is 17%. The company's cost of capital (cost of access to funds to finance projects) is 10%. If projects X and Y are independent and the company has enough funds to do both, which project(s) should it choose? If they are mutually exclusive, which one do you choose?
4-a project costs $500,000 upfront and has the following cash flows:
year 1. $100,000
year 2. $200,000
year 3. $300,000
year 4. $450,000
year 5. $550,000
Calculate the NPV using a discount rate of 11%. If this project is separate from other projects the company is considering and the company has sufficient funds, should this project be accepted?
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If Project A and Project B are mutually exclusive and the company has 250000 to spend on capital budgeting projects the decision would be based on the net present value NPV of each project NPV is a me...Get Instant Access to Expert-Tailored Solutions
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