Homework Answers
Please find below the solution.. .let me know if you need any clarification
Correct answer is option : There is more than one sign change in the cash flow.
If the cash flows are not normal means not have one sign example one year its outflow and other year its inflow then this may lead to multiple IRR situation.
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gouve 1 pts Question 10 The problem of multiple IRR's can occur when: there is only...
Which of the statements below is TRUE? One problem with IRR as a decision rule is...
Which of the statements below is TRUE? One problem with IRR as a decision rule is that if the cash flow is not standard, there is a possibility of multiple IRRs for a single project. When we talk about standard cash flow for a project, we assume an initial cash outflow at the beginning of the project and negative cash flows in the future. For every period that the cash flow has a change of sign (negative to positive or...
Assume a project has normal cash flows. Given this, you should accept the project Multiple Choice...
Assume a project has normal cash flows. Given this, you should accept the project Multiple Choice a) if the total cash inflows exceed the initial cash outflow. b) if, and only if, the NPV is exactly equal to zero. c) if the NPV is positive and reject it if the NPV is negative. d) only if the NPV is equal to the initial cash flow. e) because it has positive cash flows for every time period after the initial investment
D l Question 1 When calculating incremental cash flows, we should include O interest O financing...
D l Question 1 When calculating incremental cash flows, we should include O interest O financing expenses Q sunk costs opportunity costs | Question 2 2 pts The cash flows that occur just because of a new project are called O marginal cash flows o project cash flos e additional cash flows O incremental cash flows 2 pts D | Question 3 Sun Corp. uses a discount rate of 6% for below-average risk projects, 8% for average-risk projects, and 10%...
Problem 5-13 Problems with IRR Howell Petroleum, Inc., is trying to evaluate a generation project with...
Problem 5-13 Problems with IRR Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year 0 1 2 Cash Flow 39,500,000 63,500,000 - 12,500,000 a-1. What is the NPV for the project if the company requires a return of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV Should the firm accept this project? Ο Νο Yes b. (A negative answer should be indicated by...
Question 5 1 pts (5) Refer to the Capital Budgeting Narrative. Assume that the firm has...
Question 5 1 pts (5) Refer to the Capital Budgeting Narrative. Assume that the firm has a threshold of 2.6 years, Will the firm accept the project based on the PB method? Capital Budgeting Narrative: Doga Bank is considering a new project. The initial investment required is $67,000 and the cost of capital is 11%. Expected cash flows over the next four years are given below: Years Cash Flow (S) 7,000 22,000 25,000 80,000 The project will NOT be accepted...
Problem 10-11 Calculating Project Cash Flow from Assets [LO1] Quad Enterprises is considering a new three-year...
Problem 10-11 Calculating Project Cash Flow from Assets [LO1] Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.31 million. The fixed asset will be depreciated straight- line to zero over its three-year tax life. The project is estimated to generate $1,725,000 in annual sales, with costs of $635,000. The project requires an initial investment in net working capital of $280,000, and the fixed asset will have a market value of $225,000...
Question 3 1 pts (3) Refer to the Capital Budgeting Narrative. What is the Discounted Payback...
Question 3 1 pts (3) Refer to the Capital Budgeting Narrative. What is the Discounted Payback Period of the project? Capital Budgeting Narrative: Doga Bank is considering a new project. The initial investment required is $46,000 and the cost of capital is 9%. Expected cash flows over the next four years are given below: Years Cash Flow (5) 6,000 30.000 14,000 70,000 3.1 years 2.7 years 2.3 years 2.2 years 3.0 years D Question 4 1 pts (4) Refer to...
Save Homework: Lab #4 Score: 0 of 7 pts Problem 16-1 7 of 17 (6 complete)...
Save Homework: Lab #4 Score: 0 of 7 pts Problem 16-1 7 of 17 (6 complete) HW Score: 13.33%, 6 of 45 pts s Question Help Consider a project with free cash flow in one year of $145,118 or $187,665, with either outcome being equally likely. The initial investment required for the project is $75,000, and the project's cost of capital is 22%. The risk-free interest rate is 10%. (Assume no taxes or distress costs.) a. What is the NPV...
OOSING MANDATORY PROJECTS ON THE BASIS OF LEAST COST m Inc. must install a new air...
OOSING MANDATORY PROJECTS ON THE BASIS OF LEAST COST m Inc. must install a new air conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant ould have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively love erating costs, while LCC has a low capital cost but higher operating costs because it...
(a) The Assignment Problem can be modeled as a Transportation Problem: yes no it depends Explanation:...
(a) The Assignment Problem can be modeled as a Transportation Problem: yes no it depends Explanation: (b) The Transportation Problem can be modeled as a Generalized Network Flow Problem: yes no it depends Explanation: (c) The Generalized Network Flow Problem with multiple source and sink nodes can be converted to a Generalized Network Flow Problem with only one source and one sink node: yes no it depends Explanation: (d) Negative arc weights in the Shortest Path Problem can never occur...
D l Question 1 When calculating incremental cash flows, we should include O interest O financing expenses Q sunk costs opportunity costs | Question 2 2 pts The cash flows that occur just because of a new project are called O marginal cash flows o project cash flos e additional cash flows O incremental cash flows 2 pts D | Question 3 Sun Corp. uses a discount rate of 6% for below-average risk projects, 8% for average-risk projects, and 10%...
Problem 5-13 Problems with IRR Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year 0 1 2 Cash Flow 39,500,000 63,500,000 - 12,500,000 a-1. What is the NPV for the project if the company requires a return of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV Should the firm accept this project? Ο Νο Yes b. (A negative answer should be indicated by...
Question 5 1 pts (5) Refer to the Capital Budgeting Narrative. Assume that the firm has a threshold of 2.6 years, Will the firm accept the project based on the PB method? Capital Budgeting Narrative: Doga Bank is considering a new project. The initial investment required is $67,000 and the cost of capital is 11%. Expected cash flows over the next four years are given below: Years Cash Flow (S) 7,000 22,000 25,000 80,000 The project will NOT be accepted...
Problem 10-11 Calculating Project Cash Flow from Assets [LO1] Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.31 million. The fixed asset will be depreciated straight- line to zero over its three-year tax life. The project is estimated to generate $1,725,000 in annual sales, with costs of $635,000. The project requires an initial investment in net working capital of $280,000, and the fixed asset will have a market value of $225,000...
Question 3 1 pts (3) Refer to the Capital Budgeting Narrative. What is the Discounted Payback Period of the project? Capital Budgeting Narrative: Doga Bank is considering a new project. The initial investment required is $46,000 and the cost of capital is 9%. Expected cash flows over the next four years are given below: Years Cash Flow (5) 6,000 30.000 14,000 70,000 3.1 years 2.7 years 2.3 years 2.2 years 3.0 years D Question 4 1 pts (4) Refer to...
Save Homework: Lab #4 Score: 0 of 7 pts Problem 16-1 7 of 17 (6 complete) HW Score: 13.33%, 6 of 45 pts s Question Help Consider a project with free cash flow in one year of $145,118 or $187,665, with either outcome being equally likely. The initial investment required for the project is $75,000, and the project's cost of capital is 22%. The risk-free interest rate is 10%. (Assume no taxes or distress costs.) a. What is the NPV...
OOSING MANDATORY PROJECTS ON THE BASIS OF LEAST COST m Inc. must install a new air conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant ould have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively love erating costs, while LCC has a low capital cost but higher operating costs because it...
(a) The Assignment Problem can be modeled as a Transportation Problem: yes no it depends Explanation: (b) The Transportation Problem can be modeled as a Generalized Network Flow Problem: yes no it depends Explanation: (c) The Generalized Network Flow Problem with multiple source and sink nodes can be converted to a Generalized Network Flow Problem with only one source and one sink node: yes no it depends Explanation: (d) Negative arc weights in the Shortest Path Problem can never occur...
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