Question
wo mutually exclusive investment projects have the following forecasted cash flows: Year A B 0 -$25,000 -$25,000 1 +13,000 0 2 +13,000 0 3 +13,000
wo mutually exclusive investment projects have the following forecasted cash flows:
Year | A | B | ||||
0 | -$25,000 | -$25,000 | ||||
1 | +13,000 | 0 | ||||
2 | +13,000 | 0 | ||||
3 | +13,000 | 0 | ||||
4 | +13,000 | +75,000 |
Use Table II and Table IV to answer the questions.
-
Compute the internal rate of return for each project. Round your answers to one decimal place. IRRA: %
IRRB: %
-
Compute the net present value for each project if the firm has a 9 percent cost of capital. Round your answers to the nearest dollar. NPVA: $
NPVB: $
-
Which project should be adopted? Why? -Select-Project AProject BItem 5 should be chosen because it has the higher -Select-NPVIRRItem 6 . It is assumed that the firm's reinvestment opportunities are more accurately represented by the -Select-firm's cost of capitalunique internal rate of return of either projectItem 7 .
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started