Question
Use the following information to solve the next ten (10) questions (Questions 26-35). Show your work for question for partial credit. (3 points each) Big
Use the following information to solve the next ten (10) questions (Questions 26-35). Show your work for question for partial credit. (3 points each)
Big Company is evaluating two projects, Project A and Project B. Both projects are of equal risk. Big Company has a WACC of 10%. The expected Free Cash Flows of the projects are as follows:
| Period | Annual Cash Flows Project A |
| Annual Cash Flows Project B |
|
|
|
|
|
| 0 | ($25,000) |
| ($25,000) |
| 1 | 5,000 |
| 20,000 |
| 2 | 10,000 |
| 10,000 |
| 3 | 15,000 |
| 8,000 |
| 4 | 20,000 |
| 6,000 |
Compute the Net Present Value of Project A.
The Net Present Value of Project B is $11,554.88. If Projects A and B are independent, considering only at the NPV method, which project(s) should Big Company proceed with? Explain your answer.
The Net Present Value of Project B is $11,554.88. If Projects A and B are mutually exclusive, considering only at the NPV method, which project(s) should Big Company proceed with? Explain your answer.
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Financial Markets and Institutions
Authors: Jeff Madura
12th edition
9781337515535, 1337099740, 1337515531, 978-1337099745
