Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following two projects: Cash flows G1 C2 C3 C4 Project A Project B -$190 -$190 75 94 75 94 75 94 75 a.

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Consider the following two projects: Cash flows G1 C2 C3 C4 Project A Project B -$190 -$190 75 94 75 94 75 94 75 a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11%. c. Which one would you choose if the cost of capital is 18%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 11%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11% c. Which one would you choose if the cost of capital is 18%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 11%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below. Req A ReqB Reqc Reg D Reg E Reg F Reg G Reg H1 Reg H2 Reg H3 If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? Which projects would you accept? Red ReqB > a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11% c. Which one would you choose if the cost of capital is 18%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 11%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below. Req A ReqB Reqc Reg D ReqE Reg F Reg G Reg H1 Req H2 Req H3 Which one would you choose if the cost of capital is 18%? Which project would you choose? a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11%. c. Which one would you choose if the cost of capital is 18%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 11%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below. Req A ReqB Reqc Reg D Reg E ReqF Reg G Reg H1 Reg H2 Reg H3 What is the payback period of each project? Project A Project B Payback Period a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11%. c. Which one would you choose if the cost of capital is 18%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 11%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below. Req A Req B Reqc Reg D ReqE Reg F Req G Reg H1 Req H2 Reg H 3 Is the project with the shortest payback period also the one with the highest NPV? Shortest payback would also mean highest NPV a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11%. c. Which one would you choose if the cost of capital is 18%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 11%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below. Req A Reg B Reqc Reg D Reg E Relar Req G Req H1 Req H2 Reg H3 What are the internal rates of return on the two projects? (Enter your answers as a percent rounded to the nearest whole number) Project A Project B IRR a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11% c. Which one would you choose if the cost of capital is 18%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 11%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below." Req A ReqB Reqc Reg D Reg E RegF Req G Reg H1 Reg H2 Reg H3 Does the IRR rule in this case give the same answer as NPV? If cost of capital is less than Cross-over rate If cost of capital is equal to or greater than Cross-over rate a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11%. c. Which one would you choose if the cost of capital is 18%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 11%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below. Req A ReqB Reqc Reg D Reg E ReqF Req G Reg H1 Req H2 Req H3 If the opportunity cost of capital is 11%, what is the profitability index for each project? (Round your answers to 2 decimal places.) Project A Project B Profitability Index a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11% c. Which one would you choose if the cost of capital is 18%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 11%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below. Req A Req B Reqc ReqD Req E Reg F Req G ReqH1 Reg H2 Req H3 Is the project with the highest profitability index also the one with the highest NPV? Highest profitability index would also mean highest NPV a. If the opportunity cost of capital is 11%, which of these two projects would you accept (A, B, or both)? b. Suppose that you can choose only one of these two projects. Which would you choose? The discount rate is still 11% c. Which one would you choose if the cost of capital is 18%? d. What is the payback period of each project? e. Is the project with the shortest payback period also the one with the highest NPV? f. What are the internal rates of return on the two projects? g. Does the IRR rule in this case give the same answer as NPV? h-1. If the opportunity cost of capital is 11%, what is the profitability index for each project? h-2. Is the project with the highest profitability index also the one with the highest NPV? h-3. Which measure should you use to choose between the projects? Complete this question by entering your answers in the tabs below. Req A Req B Reqc Reg D Reg E Reg F Req G Reg H1 Reg H2 Reg H3 Which measure should you use to choose between the projects? If capital is rationed if capital is not rationed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Mergers Acquisitions And Other Restructuring Activities

Authors: Donald DePamphilis

9th Edition

0128016094, 978-0128016091

More Books

Students also viewed these Finance questions