Homework Answers
In capital budgeting decisions, mutually exclusive projects refer to a sect of projects out of which only one project can be selected for investment. A decision to undertake one project from mutually exclusive projects excludes all other projects from consideration.
In case of mutually exclusive projects, the project with highest net present value or the highest IRR or the lowest payback period is preferred and a decision to invest in that winning project exclused all other projects from consideration even if they individually have positive NPV or higher IRR than hurdle rate or shorter payback period than the reference period.
Please use Excel to solve. NPV and IRR for Mutually Exclusive Projects 10. A company is...
Please use Excel to solve.
NPV and IRR for Mutually Exclusive Projects 10. A company is considering two mutually exclusive projects, A and B. Project A requires an initial investment of $200, followed by cash flows of $185, $40, and $15. Project B requires an initial investment of $200, followed by cash flows of S0, $50, and $230. What is the NPV and IRR for each of the projects? Which project should the company choose? The firm's cost of capital...
IRR: Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive...
IRR: Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capac ity. The relevant cash flows for the projects are shown in the following table. The firm's cost of capital is 15%. Initial investment (CF) Year (1) Project X Project Y $500,000 $325,000 Cash inflows (CF) $100,000 $140,000 120,000 120,000 150,000 95,000 190,000 70,000 250,000 50,000 a. Calculate the IRR to the nearest whole percent for each of...
IRR—Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects...
IRR—Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: . The firm's cost of capital is 12%. a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs. b. Which project is preferred? 0 Data Table a. The internal rate of return (IRR) of...
IRR-Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects...
IRR-Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: B . The firm's cost of capital is 13%. a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs. b. Which project is preferred? a. The internal rate of return (IRR) of project X...
The IRR-Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive...
The IRR-Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: firm's cost of capital is 15% a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs. b. Which project is preferred? a. The internal rate of return (IRR) of project X is %...
For two mutually exclusive projects the project with the higher IRR is the correct selection. True...
For two mutually exclusive projects the project with the higher IRR is the correct selection. True or False
What are some potential problems in using internal rate of return (IRR) for mutually exclusive projects?
What are some potential problems in using internal rate of return (IRR) for mutually exclusive projects?
IRR AND NPV A company is analyzing two mutually exclusive projects, S and L, with the...
IRR AND NPV A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 1 2 Project S - $1,000 $902.08 $240 $5 $15 Project L - $1,000 $5 $260 $380 $838.13 The company's WACC is 9.5%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places.
Your firm is considering two mutually exclusive investment opportunities, investment A has an expected IRR of...
Your firm is considering two mutually exclusive investment opportunities, investment A has an expected IRR of 15%/year while investment B has an expected IRR of 12%/year, is it clear that investment A is better than investment B. Explain your reasoning.
IRR AND NPV A company is analyzing two mutually exclusive projects, S and L, with the...
IRR AND NPV A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 0 1 2 3 4 Project S -$1,000 $886.38 $250 $15 $10 Project L -$1,000 $0 $240 $400 $843.31 The company's WACC is 9.0%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places. %
Please use Excel to solve.
NPV and IRR for Mutually Exclusive Projects 10. A company is considering two mutually exclusive projects, A and B. Project A requires an initial investment of $200, followed by cash flows of $185, $40, and $15. Project B requires an initial investment of $200, followed by cash flows of S0, $50, and $230. What is the NPV and IRR for each of the projects? Which project should the company choose? The firm's cost of capital...
IRR: Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capac ity. The relevant cash flows for the projects are shown in the following table. The firm's cost of capital is 15%. Initial investment (CF) Year (1) Project X Project Y $500,000 $325,000 Cash inflows (CF) $100,000 $140,000 120,000 120,000 150,000 95,000 190,000 70,000 250,000 50,000 a. Calculate the IRR to the nearest whole percent for each of...
IRR—Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: . The firm's cost of capital is 12%. a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs. b. Which project is preferred? 0 Data Table a. The internal rate of return (IRR) of...
IRR-Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: B . The firm's cost of capital is 13%. a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs. b. Which project is preferred? a. The internal rate of return (IRR) of project X...
The IRR-Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capacity. The relevant cash flows for the projects are shown in the following table: firm's cost of capital is 15% a. Calculate the IRR for each of the projects. Assess the acceptability of each project on the basis of the IRRs. b. Which project is preferred? a. The internal rate of return (IRR) of project X is %...
IRR AND NPV A company is analyzing two mutually exclusive projects, S and L, with the following cash flows: 1 2 Project S - $1,000 $902.08 $240 $5 $15 Project L - $1,000 $5 $260 $380 $838.13 The company's WACC is 9.5%. What is the IRR of the better project? (Hint: The better project may or may not be the one with the higher IRR.) Round your answer to two decimal places.
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