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Time Project AProject B ($30) $5 $10 $15 $20 (S30) $20 $10 $8 $6 If the WACC was 5%, would this change your recommendation if
Time Project AProject B ($30) $5 $10 $15 $20 (S30) $20 $10 $8 $6 If the WACC was 5%, would this change your recommendation if the projects were mutually exclusive? If the WACC was 15%, would this change your recommendation? Explain your answers. f. The is 13.5252%. Explain what this rate is and how it affects the choice between crossover rate mutually exclusive projects. g. Is it possible for conflicts to exist between the NPV and the IRR when independent projects are being evaluated? Explain your answer. h. Now, look at the regular and discounted paybacks. Which project looks better when judged by the paybacks? L. If the payback was the only method a firm used to accept or reject projects, what payback should it choose as the cutoff point, that is, reject projects if their paybacks are not below the chosen cutoff? Is your selected cutoff based on some economic criteria, or is it more or less arbitrary? Are the cutoff criteria equally arbitrary when flrms use the NPV and/or the IRR as the criterla? Explain, j. Define the MIRR. What's the difference between the IRR and the MIRR, and which generally gives a better idea of the rate of return on the investment in a project? Explain k. Why do most academics and financial executives regard the NPV as belng the single best criterion and better than the IRR? Why do companies still calculate IRRs? Time Project AProject B ($30) $5 $10 $15 $20 (S30) $20 $10 $8 $6 If the WACC was 5%, would this change your recommendation if the projects were mutually exclusive? If the WACC was 15%, would this change your recommendation? Explain your answers. f. The is 13.5252%. Explain what this rate is and how it affects the choice between crossover rate mutually exclusive projects. g. Is it possible for conflicts to exist between the NPV and the IRR when independent projects are being evaluated? Explain your answer. h. Now, look at the regular and discounted paybacks. Which project looks better when judged by the paybacks? L. If the payback was the only method a firm used to accept or reject projects, what payback should it choose as the cutoff point, that is, reject projects if their paybacks are not below the chosen cutoff? Is your selected cutoff based on some economic criteria, or is it more or less arbitrary? Are the cutoff criteria equally arbitrary when flrms use the NPV and/or the IRR as the criterla? Explain, j. Define the MIRR. What's the difference between the IRR and the MIRR, and which generally gives a better idea of the rate of return on the investment in a project? Explain k. Why do most academics and financial executives regard the NPV as belng the single best criterion and better than the IRR? Why do companies still calculate IRRs
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