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Use the following information about Company Y below to help answer problems 8-9. Today (T=0), Company Y is evaluating Project 1 and Project 2 Each
Use the following information about Company Y below to help answer problems 8-9. Today (T=0), Company Y is evaluating Project 1 and Project 2 Each project's initial cash outlay and future cash flows are forecasted below Management's primary goal is to maximize firm value by maximizing NPV Project 1 Project 2 CFO -360 -400 CF1 90 60 CF2 90 80 CF3 90 100 CF4 90 120 CF5 90 125 CF6 90 120 CF 90 115 CF8 90 100 Assume the projects are mutually exclusive. Which of the following statements is most likely FALSE: a. The projects have the same payback period b. If the cost to finance either project is 12%, management should accept both projects C. If the cost to finance either project is 15%, management should only accept Project 2 d. If the cost to finance either project is 18%, management should only accept Project 1 e. If the cost to finance either project is 21%, management should reject both Projects 9. Assume management has enough capital to accept both projects if desired. Which of the following statements is most likely TRUE: a. The projects have the same payback period b. If the cost to finance either project is 18%, management should accept both projects c. If the cost to finance either project is 18%, management should only accept Project 2 d. If the cost to finance either project is 15%, management should reject both Projects e. If the cost to finance either project is 12%, management should only accept Project 1
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