Question
You have to pick between three mutually exclusive projects with the following cash flows to the firm. [09, 3 points each] Year Project A Project
- You have to pick between three mutually exclusive projects with the following cash flows to the firm. [09, 3 points each]
| Year | Project A | Project B | Project C |
| 0 | -$10,000 | $5,000 | -$15,000 |
| 1 | $8,000 | $5,000 | $10,000 |
| 2 | $7,000 | - $8,000 | $10,000 |
The cost of Capital is 12.5%
- Which project would you pick using NPV rule?
- Which project would you pick using IRR rule?
- How would you explain the difference between the two rules? Which one would you reply on to make your choice?
Your pharmaceutical company is very interested in acquiring AllergyGone, a potential new anti-allergy drug with no known side effects. You have been asked to determine if this product is worth acquiring. You are provided with the projected income statements for a project.
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Finance Theory And Practice
Authors: Anne Marie Ward
3rd Edition
1908199482, 978-1908199485
