Answered step by step
Verified Expert Solution
Link Copied!

Question

...
1 Approved Answer

show a very brief work and the final answer for each part as soon as possible please. Consider the following cash flows for mutually exclusive

show a very brief work and the final answer for each part as soon as possible please.

image text in transcribed

Consider the following cash flows for mutually exclusive projects A, B, and C: (parentheses denote cash outflows) Project CF - CF $49,282 CF ($200,000) (100,000) 100,000 End of Project (5) $70,000 50,000 (3,040) B 26,720 (23,200) Required: (3 points each) 1. Calculate IRR's for project A and for project B. Which is better -- solely in terms of IRR? 2. Calculate the incremental rate of return of an investment in project A over project B(A-B). Which project is really better if your MARR (Minimum Acceptable Rate of Return) is 9%? 3. Calculate the NPV of projects A and B at an MARR of 9%. Which is better in terms of NPV? 4. For what range of MARR's would project A be the better project? For what range of MARR's would project B be the better project? For what range would neither be a good choice? 5. What is the IRR on project C? If the relevant discount rate for decision-making purposes is 9%, which is better, project B or project C, and why? Part B (5 points) Suppose that you are considering a $180,000, thirty-year mortgage with an APR of 3.6%, compounded monthly, with payments due at the end of each month. a. How long would it take to pay this mortgage down to one-quarter of its original amount (75% gone)? (3 points) b. How long would it take you to pay it off completely if you added $100 to each monthly payment? (2 points) Part C (5 points) You cousin currently has a $240,000 home mortgage with monthly payments at an APR of 4.8%. She took out this mortgage exactly eight years ago with an original maturity of thirty years. Now, she is considering refinancing the mortgage and asks you for help. She wants to know what her new monthly payment would be at an APR of 3.6% over the remaining twenty-two years of her mortgage. What would be the amount of her new monthly payment

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Horngrens Financial and Managerial Accounting

Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura

5th edition

978-0133866292

Students also viewed these Finance questions