You are analyzing two mutually exclusive projects with the cash flows shown below. The cash flows are in millions. Both projects are equally risky. Your costs of capital are 12%.
Year |
Project 1 |
Project 2 |
0 |
-$140 |
-$90 |
1 |
$50 |
$40 |
2 |
$45 |
$35 |
3 |
$40 |
$30 |
4 |
$35 |
$25 |
5 |
$30 |
$20 |
6 |
$25 |
$15 |
7 |
$20 |
$10 |
8 |
$15 |
$5 |
9 |
$10 |
$0 |
10 |
$5 |
-$5 |
b. Compute the IRRs of the two projects.
c. Compute the simple payback periods of the two projects.
d. Compute the discount rate where you are indifferent between the projects (i.e., incremental IRR).
e. Which project should you execute? Briefly explain why.
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You are analyzing two mutually exclusive projects with the cash flows shown below. The cash flows...
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10% DISCOUNT RATE 4. You Corp, is analyzing two mutually exclusive projects. The free cash flows associated with these projects are as follows. Year Cash Flows ܘ -50,000 ܝ ܟܬ Cash Flows -50,000 15,625 15,625 15,625 15,625 15,625 ܚ ܠܛ ܗ 100,000 A) What s each project's payback period? B) What is each project's NPV? C) What is each project's IRR? D) Which project should be accepted? Why? We were unable to transcribe this image
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