A project has positive NPV. The required return for the project is 15%. Which of the...
Homework Answers
Positive NPV means that IRR is also greater than cost of capital i.e. 15%
And PI>1, since PI = Present value of cash inflows/Present value of cash outflows
Since the project has positive NPV, the project should be accepted
A and B does not make any sense since they are never negative.
Payback period cannot be inferred from NPV
hence, the correct statements are C., D. and F
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A project has positive NPV. The required return for the
project is 15%. Which of the...
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,...
Use the following information to answer questions 16 through 20. You are analyzing a proposed project...
Use the following information to answer questions 16 through 20. You are analyzing a proposed project and have compiled the following information Year Cash flow 0 $145,000 1 $33,400 $ 70,500 $ 82,100 Required payback period 3 years Required return 9.50 percent 16. What is the net present value of the proposed project? a. S6,239.12 b. 58.221.29 c. S6,831.84 d. 58,376.91 17. Should the project be accepted based on the internal rate of return (IRRY? Why or why not? a....
18. Which of the following is NOT true about the internal rate of return: A) A...
18. Which of the following is NOT true about the internal rate of return: A) A good project is one with IRR greater than the required return. B) IRR is the discount rate that results in a zero net present value for the project. C) Crossover rate for two projects is the IRR of the project with the difference of the cash flows of the two projects.. D) For two projects of the same size, IRR will usually choose the...
please include parts a - d , thanks (NPV, PI, and IRR calculations) Fijisawa Inc. is...
please include parts a - d ,
thanks
(NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $2,000,000, and the project would generate incremental free cash flows of $550,000 per year for 6 years. The appropriate required rate of return is 9 percent. a. Calculate the NPV b. Calculate the Pl c. Calculate the IRR. d....
You must know the required return to compute the project’s A. NPV, IRR, PI, and discounted...
You must know the required return to compute the project’s A. NPV, IRR, PI, and discounted payback period B. NPV, PI, IRR C. NPV, IRR, discount payback period D. NPV, PI, discounted payback period E. IRR, PI, discounted payback period
Your first assignment in your new position as assistant financial analyst at Caledonia Products is to...
Your first assignment in your new position as assistant financial analyst at Caledonia Products is to evaluate two new capital-budgeting proposals. Because this is your first assignment, you have been asked not only to provide a recommendation but also to respond to a number of questions aimed at assessing your understanding of the capital-budgeting process. This is a standard procedure for all new financial analysts at Caledonia, and it will serve to determine whether you are moved directly into the...
Project A has an internal rate of return (IRR) of 15 percent. Project B has an...
Project A has an internal rate of return (IRR) of 15 percent. Project B has an IRR of 14 percent. Both projects have a cost of capital of 12 percent. Which of the following statements is most correct? Question 3 options: Both projects have a positive net present value (NPV). Project A must have a higher NPV than Project B. If the cost of capital were less than 12 percent, Project B would have a higher IRR than Project A....
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...
(NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line...
(NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay would be $1,800,000, and the project would generate incremental free cash flows of $600,000 per year for 5 years. The appropriate required rate of return is 8 percent. a. Calculate the NPV. b. Calculate the Pl. c. Calculate the IRR. d. Should this project be accepted? a. What...
Question 10 7.5 pts You are considering a project with conventional cash flows. The IRR is...
Question 10 7.5 pts You are considering a project with conventional cash flows. The IRR is 15.7 percent, NPV is -$198, and the payback period is 3.92 years. Which one of the following statements is correct given this information? This project should be accepted based on the internal rate of return. The discount rate used in computing the net present value was less than 15.7 percent. The required rate of return must be greater than 15.7 percent. The discounted payback...
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,...
Use the following information to answer questions 16 through 20. You are analyzing a proposed project and have compiled the following information Year Cash flow 0 $145,000 1 $33,400 $ 70,500 $ 82,100 Required payback period 3 years Required return 9.50 percent 16. What is the net present value of the proposed project? a. S6,239.12 b. 58.221.29 c. S6,831.84 d. 58,376.91 17. Should the project be accepted based on the internal rate of return (IRRY? Why or why not? a....
18. Which of the following is NOT true about the internal rate of return: A) A good project is one with IRR greater than the required return. B) IRR is the discount rate that results in a zero net present value for the project. C) Crossover rate for two projects is the IRR of the project with the difference of the cash flows of the two projects.. D) For two projects of the same size, IRR will usually choose the...
please include parts a - d ,
thanks
(NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $2,000,000, and the project would generate incremental free cash flows of $550,000 per year for 6 years. The appropriate required rate of return is 9 percent. a. Calculate the NPV b. Calculate the Pl c. Calculate the IRR. d....
(NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay would be $1,800,000, and the project would generate incremental free cash flows of $600,000 per year for 5 years. The appropriate required rate of return is 8 percent. a. Calculate the NPV. b. Calculate the Pl. c. Calculate the IRR. d. Should this project be accepted? a. What...
Question 10 7.5 pts You are considering a project with conventional cash flows. The IRR is 15.7 percent, NPV is -$198, and the payback period is 3.92 years. Which one of the following statements is correct given this information? This project should be accepted based on the internal rate of return. The discount rate used in computing the net present value was less than 15.7 percent. The required rate of return must be greater than 15.7 percent. The discounted payback...
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