When we evaluate investment projects, a) do we prefer higher or lower NPV? (1=higher, 2=lower) b)...
When we evaluate investment projects,
a) do we prefer higher or lower NPV?
(1=higher, 2=lower)
b) do we prefer higher or lower IRR?
(1=higher, 2=lower)
c) do we prefer higher or lower payback period?
(1=higher, 2=lower)
d) do we prefer higher or lower modified payback period?
(1=higher, 2=lower)
e) do we prefer higher or lower SRR?
(1=higher, 2=lower)
Homework Answers
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When we evaluate investment projects,
a) do we prefer higher or lower NPV?
(1=higher, 2=lower)
b)...
Question 3 When we evaluate investment projects, a) do we prefer higher or lower NPV? (1=higher,...
Question 3 When we evaluate investment projects, a) do we prefer higher or lower NPV? (1=higher, 2=lower) b) do we prefer higher or lower IRR? (1=higher, 2=lower) c) do we prefer higher or lower payback period? (1=higher, 2 =lower) d) do we prefer higher or lower modified payback period? (1=higher, 2=lower) e) do we prefer higher or lower SRR? (1=higher, 2=lower)
Question 1 (evaluating investment projects) Generic Motors Corporation is planning to invest $100,000 in year zero...
Question 1 (evaluating investment projects) Generic Motors Corporation is planning to invest $100,000 in year zero (today) in new equipment. This investment is expected to generate net cash flows of $40,000 a year for the next 4 years (years 1-4). The salvage value after 4 years is zero. The discount rate (cost of capital) is 20% a year. Required: a) What is the net present value (NPV) of this project? NPV = $ Should the firm invest, based on NPV?...
1. We can get multiple IRRS when we draw an NPV profile for a project when:...
1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requires a large investment. c. The project cash flows are uneven and change in sign. d. The project has a balloon payment. e. The opportunity cost of capital is high. 2. The length of time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of...
Question 1 (evaluating investment projects) Generic Motors Corporation is planning to invest $150,000 in year zero...
Question 1 (evaluating investment projects) Generic Motors Corporation is planning to invest $150,000 in year zero (today) in new equipment. This investment is expected to generate net cash flows of $60,000 a year for the next 4 years (years 1-4). The salvage value after 4 years is zero. The discount rate (cost of capital) is 20 % a year Required: a) What is the net present value (NPV) of this project? NPV Should the firm invest, based on NPV? (1-yes,...
A firm is considering two mutually exclusive projects with equal lives, Project A has an NPV...
A firm is considering two mutually exclusive projects with equal lives, Project A has an NPV of $100,000, an IRR of 12%, and a payback period of 3.1 years. Project B has an NPV of $120,000, an IRR of 14%, and a payback period of 2.8 years. The firm should choose________. Question 34 options: 1) Project A because its NPV is higher than Project B's 2) Project A because its payback period is longer than Project B's 3) Project B...
Problem 1) Take the difference between the payback period of Projects A and B, i.e.,...
Problem 1) Take the difference between the payback period of
Projects A and B, i.e., calculate: X = Payback Period of Project A
- Payback Period of Project B.
Select one:
a)-3
b)-2
c)-1
d)0
e)1
f)2
g)3
h)Insufficient information
Problem 1) What is (are) the posiive IRR(s) of Project C?
Select one:
a)0%
b)100%
c)104.3% is one of the IRRs and another IRR exists
d)0% is one of the IRRs and another IRR exists
e)7.7% only
f)56.3% is...
1. The most popular capital budgeting techniques used in practice to evaluate and select projects are...
1. The most popular capital budgeting techniques used in practice to evaluate and select projects are payback period, Net Present Value (NPV), and Internal Rate of Return (IRR). 2. Payback period is the number of years required for a company to recover the initial investment cost. 3. Net Present Value (NPV) technique: NPV is found by subtracting a project’s initial cost of investment from the present value of its cash flows discounted using the firm’s weighted average cost of capital....
When applying NPV and IRR methods to evaluate potential projects, both require use of a discount...
When applying NPV and IRR methods to evaluate potential projects, both require use of a discount rate. What is the discount rate used for NPV and IRR, respectively? A) Cost of equity; cost of capital B) IRR; cost of capital C) Cost of capital; cost of capital D) Cost of capital; IRR
All techniques with NPV profile - Mutually exclusive projects Projects A and B, of equal risk,...
All techniques with NPV profile - Mutually exclusive projects Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of capital is 16%. The cash flows for each project are shown in the following table: PF a. Calculate each project's payback period. b. Calculate the net present value (NPV) for each project. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. a. The payback...
Isaac has analyzed two mutually exclusive projects that have 3-year lives. Project A has an NPV...
Isaac has analyzed two mutually exclusive projects that have 3-year lives. Project A has an NPV of $81,406, a payback period of 2.48 years, and an IRR of 9.31 percent. Project B has an NPV of $82,909, a payback period of 2.57 years, and an IRR of 9.22 percent. The firm’s cost of capital is 9.15 percent and required payback period is 2.8 years. Isaac must make a recommendation and justify it in 15 words or less. What should his...
Question 3 When we evaluate investment projects, a) do we prefer higher or lower NPV? (1=higher, 2=lower) b) do we prefer higher or lower IRR? (1=higher, 2=lower) c) do we prefer higher or lower payback period? (1=higher, 2 =lower) d) do we prefer higher or lower modified payback period? (1=higher, 2=lower) e) do we prefer higher or lower SRR? (1=higher, 2=lower)
Question 1 (evaluating investment projects) Generic Motors Corporation is planning to invest $100,000 in year zero (today) in new equipment. This investment is expected to generate net cash flows of $40,000 a year for the next 4 years (years 1-4). The salvage value after 4 years is zero. The discount rate (cost of capital) is 20% a year. Required: a) What is the net present value (NPV) of this project? NPV = $ Should the firm invest, based on NPV?...
1. We can get multiple IRRS when we draw an NPV profile for a project when: a. The project is riskless. b. The project requires a large investment. c. The project cash flows are uneven and change in sign. d. The project has a balloon payment. e. The opportunity cost of capital is high. 2. The length of time required for an investment to generate cash flows sufficient to recover its initial cost, without taking into account time value of...
Question 1 (evaluating investment projects) Generic Motors Corporation is planning to invest $150,000 in year zero (today) in new equipment. This investment is expected to generate net cash flows of $60,000 a year for the next 4 years (years 1-4). The salvage value after 4 years is zero. The discount rate (cost of capital) is 20 % a year Required: a) What is the net present value (NPV) of this project? NPV Should the firm invest, based on NPV? (1-yes,...
Problem 1) Take the difference between the payback period of
Projects A and B, i.e., calculate: X = Payback Period of Project A
- Payback Period of Project B.
Select one:
a)-3
b)-2
c)-1
d)0
e)1
f)2
g)3
h)Insufficient information
Problem 1) What is (are) the posiive IRR(s) of Project C?
Select one:
a)0%
b)100%
c)104.3% is one of the IRRs and another IRR exists
d)0% is one of the IRRs and another IRR exists
e)7.7% only
f)56.3% is...
All techniques with NPV profile - Mutually exclusive projects Projects A and B, of equal risk, are alternatives for expanding Rosa Company's capacity. The firm's cost of capital is 16%. The cash flows for each project are shown in the following table: PF a. Calculate each project's payback period. b. Calculate the net present value (NPV) for each project. c. Calculate the internal rate of return (IRR) for each project. d. Indicate which project you would recommend. a. The payback...
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