Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Romboski, LLC, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 $ 65,000 $ 65,000 1 41,000 27,500

Romboski, LLC, has identified the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)
0 $ 65,000 $ 65,000
1 41,000 27,500
2 35,000 31,500
3 23,500 37,000
4 15,000 24,500

Requirement 1:
(a)

What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage roundedto 2 decimal places (e.g., 32.16).)

Internal rate of return
Project A %
Project B %

(b) If you apply the IRR decision rule, which project should the company accept?

Requirement 2:
(a)

Assume the required return is 11 percent. What is the NPV for each of these projects? (Do not round intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).)

Net present value
Project A $
Project B $

(b) Which project will you choose if you apply the NPV decision rule?

Requirement 3:
(a)

Over what range of discount rates would you choose Project A? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Project A
@ %

(b)

Over what range of discount rates would you choose Project B? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Project B
@ %

(c)

At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Discount rate %

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

Machine Learning In Finance From Theory To Practice

Authors: Matthew F Dixon, Igor Halperin, Paul Bilokon

1st Edition

3030410676, 978-3030410674

More Books

Students also viewed these Finance questions

Question

Evaluate different types of international strategy

Answered: 1 week ago

Question

What is the purpose of the application form?

Answered: 1 week ago

Question

What is the general purpose of preliminary screening?

Answered: 1 week ago