Homework Answers
Answer to question number 21
- Reject
Explanation
IRR is the rate at which the present value of all cash flows from the project equals to the initial investment. This is a position where there is no gain on loss from the project.
Decision Rule
|
If |
Capital budgeting decision |
|
IRR <Required Return |
Reject the project |
|
IRR = |
Indifferent |
|
IRR >Required Return |
Accept the project |
Required
ReturnAs per the question required rate is 12% and IRR is 10.97% i.e. IRR is less than Required rate so reject the project.
Answer to question number 22
- Accept
Explanation
NPV is the difference between the present value of cash inflows and the present value of cash out flows over the life of the project.
Decision Rule
|
When |
Capital budgeting decision |
|
NPV > Zero |
Accept the project |
|
NPV< Zero |
Reject the project |
In the given question NPV is 56,478, which is more than 0 (Zero) so accept the project.
Add Answer to:
D Question 21 1 pts You have a required return of 12%. A project that you...
Question 24 1 pts You are considering the following two mutually exclusive projects. Which project(s) should...
Question 24 1 pts You are considering the following two mutually exclusive projects. Which project(s) should be recommended? Project A Project B Year Cash Flow Year Cash Flow 0 $75,000 0 -$70,000 1 $19,000 1 $10,000 2 $48,000 2 $16,000 3 $12,000 3 $72,000 Required rate of return: 10 percent (for A) 13 percent (for B) O accept project B and reject project A. accept both project A and project B. O reject both project A and project B. O...
2 pts Question 5 Your required return is 10%. Should you accept a project with the...
2 pts Question 5 Your required return is 10%. Should you accept a project with the following cash flows? 2 3 Year Cash Flow -$25 +$7 +$8 +$15 O Yes, because the NPV is $5. Yes, because the IRR is 12.45% Yes, because the IRR is 30%. No, because the IRR is only 8.48%. No, because the IRR is 10.31%
Question 1 5 pts What is WACC? Why is it important? O The firm's required return....
Question 1 5 pts What is WACC? Why is it important? O The firm's required return. It is used as the discount rate in NPV and it is used to compare to IRR. O It is the required return on debt. O It is the firm's required return. If IRR is less than WACC, you should accept the project. O It is the required return on equity. Question 2 5 pts What are some of the issues with the payback...
Consider Project Theta, its time line of cash flows, and one of the project IRRs: Year....................0.............1............2............IRR...
Consider Project Theta, its time line of cash flows, and one of the project IRRs: Year....................0.............1............2............IRR Cash Flow......($200).....$850....($700)......15% What is the best decision for Project Theta (accept or reject) if the project’s required rate of return is 15% and why? a. Accept the project because the payback is short b. Accept the project because the NPV is greater than zero c. Reject the project because the IRR is less than the required rate of return d. Reject the project because...
Consider Project Theta, its time line of cash flows, and one of the project IRRs: Year...................0..............1...............2...........IRR...
Consider Project Theta, its time line of cash flows, and one of the project IRRs: Year...................0..............1...............2...........IRR Cash Flow.....($200).....$850.......($700).......15% What is the best decision for Project Theta (accept or reject) if the project’s required rate of return is 15% and why? a. Reject the project because the NPV is less than zero b. Accept the project because the IRR is greater than zero c. Accept the project because the NPV is greater than zero d. Accept the project because the payback...
Question 2 1 pts The internal rate of return may be defined as Jh The discount...
Question 2 1 pts The internal rate of return may be defined as Jh The discount rate that makes the project NPV equal to zero. The discount rate that makes the PV of the expected cash flows equal to the initial outlay. the market rate of interest less the risk free rate. a&b are both correct. a&care both correct Question 3 1 pts For independent projects, the NPV method and the IRR method will always lead to the same accept/reject...
Question 10 7.5 pts You are considering a project with conventional cash flows. The IRR is...
Question 10 7.5 pts You are considering a project with conventional cash flows. The IRR is 15.7 percent, NPV is -$198, and the payback period is 3.92 years. Which one of the following statements is correct given this information? This project should be accepted based on the internal rate of return. The discount rate used in computing the net present value was less than 15.7 percent. The required rate of return must be greater than 15.7 percent. The discounted payback...
You are analyzing a project and have prepared the following data: Year Cash Flow $169,000 $46,200...
You are analyzing a project and have prepared the following
data: Year Cash Flow $169,000 $46,200 I$87,300 $41,000 I$39,000 1
12 4 Required payback period 2.5 years Required return 8.50% the
project. Based on the profitability index of 0.97; accept for this
project, you should 1.05; accept 1.18; accept 0.97; reject 1.05;
reject
Question 15 You are analyzing a project and have prepared the following data: Year Cash Flow $169,000 $46,200 $87,300 $41,000 $39,000 Required payback period 2.5 years Required...
3. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should...
3. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent? Year Project A Project B -$80,000 -$80,000 31,000 31,000 0 31,000 110,000 A. accept project A as it always has the higher NPV B. accept project B as it always has the higher NPV C. accept A at 8.5 percent and B at 13 percent D. accept...
1) Suppose that you calculate the NPV of a project, and obtain a value of $100...
1) Suppose that you calculate the NPV of a project, and obtain a value of $100 million dollars. After completing your analysis, you find out that the corporate tax rate will change from 40% to 30%. If nothing else changes, what is the effect of this tax change on the NPV you had calculated? Assume that your company has no debt. a) The new NPV will be lower than $100 b) The new NPV will be higher than $100 c)...
Question 24 1 pts You are considering the following two mutually exclusive projects. Which project(s) should be recommended? Project A Project B Year Cash Flow Year Cash Flow 0 $75,000 0 -$70,000 1 $19,000 1 $10,000 2 $48,000 2 $16,000 3 $12,000 3 $72,000 Required rate of return: 10 percent (for A) 13 percent (for B) O accept project B and reject project A. accept both project A and project B. O reject both project A and project B. O...
2 pts Question 5 Your required return is 10%. Should you accept a project with the following cash flows? 2 3 Year Cash Flow -$25 +$7 +$8 +$15 O Yes, because the NPV is $5. Yes, because the IRR is 12.45% Yes, because the IRR is 30%. No, because the IRR is only 8.48%. No, because the IRR is 10.31%
Question 1 5 pts What is WACC? Why is it important? O The firm's required return. It is used as the discount rate in NPV and it is used to compare to IRR. O It is the required return on debt. O It is the firm's required return. If IRR is less than WACC, you should accept the project. O It is the required return on equity. Question 2 5 pts What are some of the issues with the payback...
Question 2 1 pts The internal rate of return may be defined as Jh The discount rate that makes the project NPV equal to zero. The discount rate that makes the PV of the expected cash flows equal to the initial outlay. the market rate of interest less the risk free rate. a&b are both correct. a&care both correct Question 3 1 pts For independent projects, the NPV method and the IRR method will always lead to the same accept/reject...
Question 10 7.5 pts You are considering a project with conventional cash flows. The IRR is 15.7 percent, NPV is -$198, and the payback period is 3.92 years. Which one of the following statements is correct given this information? This project should be accepted based on the internal rate of return. The discount rate used in computing the net present value was less than 15.7 percent. The required rate of return must be greater than 15.7 percent. The discounted payback...
You are analyzing a project and have prepared the following
data: Year Cash Flow $169,000 $46,200 I$87,300 $41,000 I$39,000 1
12 4 Required payback period 2.5 years Required return 8.50% the
project. Based on the profitability index of 0.97; accept for this
project, you should 1.05; accept 1.18; accept 0.97; reject 1.05;
reject
Question 15 You are analyzing a project and have prepared the following data: Year Cash Flow $169,000 $46,200 $87,300 $41,000 $39,000 Required payback period 2.5 years Required...
3. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent? Year Project A Project B -$80,000 -$80,000 31,000 31,000 0 31,000 110,000 A. accept project A as it always has the higher NPV B. accept project B as it always has the higher NPV C. accept A at 8.5 percent and B at 13 percent D. accept...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago