ZuoTi.Pro
Question

which increases the value of a firm? I. A project with IRR of 15% when the...

which increases the value of a firm?

I. A project with IRR of 15% when the WACC is 14%

II. A project with NPV of $18,950

III. A project with a payback of 2 years

------------------------

A. I, II, III

B. I and II

C. I only

D. II and III

E. II only

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

1. Since IRR > WACC it is value accretive

2. Since NPV is positive, then it is value accretive

3.We can't decide just on the basis of payback whether it is value accretive or not.

Hence answer is option B

0 0
Add a comment
Know the answer?
Add Answer to:
which increases the value of a firm? I. A project with IRR of 15% when the...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 1. A. Which of the following mutually exclusive projects should be accepted? Project NPV Payback IRR...

    1. A. Which of the following mutually exclusive projects should be accepted? Project NPV Payback IRR A +42,176 2 years, +$10,500 16.4% B +39,090 2 years, +9,670 15.8% C +41,894 3 years, +16,620 13.2% D +43,778 3 years, +11,625 14.9% E +38,952 2 years, +15,475 15.9% B. What is the Payback Period of a project with an initial cost of $75,000, Year 1 cash flow of $20,000 which increases by 5% each year? If the Payback cutoff is 3 years,...

  • 8) Project A has an internal rate of return (IRR) of 15 percent. Project B has...

    8) Project A has an internal rate of return (IRR) of 15 percent. Project B has an IRR of 14 percent. Both projects have a required retum of 12 percent. Which of the following statements is MOST correct? A) Project A must have a higher NPV than Project B. B) Both projects have a positive net present value (NPV) C) Project B has a higher profitability index than Project A. D) If the required return were less than 12 percent,...

  • Assume a project has conventional cash flows. All else equal, which of the following statements is...

    Assume a project has conventional cash flows. All else equal, which of the following statements is CORRECT? a. The project's MIRR is unaffected by changes in the WACC. b. The project's NPV increases as the WACC declines. c. The project's IRR increases as the WACC declines. d. The project's discounted payback increases as the WACC declines. e. The project's regular payback increases as the WACC declines.

  • st: Chapter 11/12 Which of the following statements is CORRECT? ation flows to account for the...

    st: Chapter 11/12 Which of the following statements is CORRECT? ation flows to account for the time value of money O b. The regular payback does not consider cash flows beyond the payback cutoff, but the discounted payback overcomes this defect. C. The the payback today. d. The regular payback method is useful as an how long it will take to recover the funds invested in the project. al QUESTION 2 les 10 cash flows. Project S has an IRR...

  • 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)...

  • 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...

  • Which of the following can result in an increase in firm value? I. Reducing net capital...

    Which of the following can result in an increase in firm value? I. Reducing net capital expenditures on existing assets II. Increasing the reinvestment rate of the firm III. Improving operating margins on existing assets Select one: a. I only b.  I and II only c. I and III only d.  II and III only e. I, II, and III only f. None of the above Which of the following statements is true concerning EVA? I. EVA will be positive when the...

  • A project has positive NPV. The required return for the project is 15%. Which of the...

    A project has positive NPV. The required return for the project is 15%. Which of the following statements is also descriptive (and meaningful) regarding the project? (More than one might be true) A. The project has positive IRR B. The project has positive PI. C. The project IRR > 15% D. The project has PI > 1 E. The project has a payback period that is less than the lifetime of the project. F. The project should be accepted.

  • help on 15 please BIRR ad N e AAR and IRR D) IRR and payback E)...

    help on 15 please BIRR ad N e AAR and IRR D) IRR and payback E) NPV and PI 15) Suppose you can confidently predict that the share price of Snakehole Lounge Company will be $300 two years from now. Over the next two years, Snakehole Lounge will pay a $15-per-share yearly dividend. If the annualized required return is 20%, what is the price you are willing to pay for one share today? Ne 2 T-20% PMT-15 FV-B300 PV:? A)...

  • NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is...

    NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $58,850, and the project is expected to yield after-tax cash inflows of $6,000 per year for 15 years. The firm has a cost of capital of 14%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. C. Would you recommend that the firm accept or reject the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT