Project B:%c. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 26.71%.)-Select-If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 26.71%.)-Select-If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 26.71%.)-Select-V

WACC = 5%:For Project A:NPV = -$1000 + ($200 / (1 + 0.05)) + ($400 / (1 + 0.05)^2) + ($600 / (1 +…

Answered: Project B: % c. If the WACC was 5% and…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EB: Wallace Company is considering two projects. Their required rate of return is 10%. Which of the two...

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a. Calculate the projects’ NPVs, IRRs, MIRRs, regular paybacks, and discounted paybacks.b. If the two projects are independent, which project(s) should be chosen?c. If the two projects are mutually exclusive and the WACC is 10%, which project(s)should be chosen?d. Plot NPV profiles for the two projects. Identify the projects’ IRRs on the graph.e. If the WACC was 5%, would this change your recommendation if the projects weremutually exclusive? If the WACC was 15%, would this change your recommendation?Explain your answers.f. The crossover rate is 13.5252%. Explain what this rate is and how it affects the choicebetween mutually exclusive projects.g. Is it possible for conflicts to exist between the NPV and the IRR when independentprojects are being evaluated? Explain your answer.h. Now look at the regular and discounted paybacks. Which project looks better whenjudged by the paybacks?i. If the payback was the only method a firm used to accept or reject projects, what paybackshould it…
Please solve for the following problem on the image. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 48.57%.) a. Project A b. Project B c. Neither Project A or B If the WACC was 10% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 48.57%.) a. Project A b. Project B c. Neither Project A or B If the WACC was 15% and A and B were mutually exclusive, which project would you choose? (Hint: The crossover rate is 48.57%.) a. Project A b. Project B c. Neither Project A or B
Compute the Profitability Index (PI) for each project? Project A Project B Profitability Index (PI) 5- In light of your answers above, suppose that these two projects might be mutually exclusive or independent. According to these two assumptions, fill in the blanks in the table below with the suitable answer: Points Investment Criteria If A and B are mutually exclusive, then I would select If A and B are independent, then I would select PBP NPV IRR PI
points) possible S Carter Company is considering three investment opportunities with the following accounting rates of return: Project X Project Y Project Z ARR 13.25% 6.58% 10,47% Use the decision rule for ARR to rank the projects from most desirable to least desirable. Carter Company's required rate of return is 8%. (1 = most desriable and 3 = least desirable. Select whether each should be accepted or rejected.) Project Rank Accept/Reject 4 deler "k I % 1 2 3 4 5 6 QWERT A trl Project X Project Y Project Z caps lock shift t fn اب 2 @ Z # S $ alt الالالا C V G & Y B hp 7 H N 8 144 ( 9 ا۔ K M U O O P > ie alt ? 7 4 J backspace pause ctri <
Wallace Company is considering two projects. Their required rate of return is 10%. Which of the two projects, A or B, is better in terms of internal rate of return?
Answer this question as it is pertaining to two MUTUALLY EXCLUSIVE projects on the following figure. If r=6%, which project would you choose by using the net present value (NPV) as the criterion? Group of answer choices Project A Project B Neither Either
What are the internal rates of return (IRR) on the three projects? Does the IRR rule in this case give the same decision as NPV? How do you know? If the opportunity cost of capital is 11%, what is the profitability index for each project? Please analyze if, in general, decisions based on the profitability index are consistent with decisions based on NPV. What is the most generally accepted measure to choose between the projects? Please justify your answer. Project A -5000 +1000 +1000 +3000 0 B -1000 0 +1000 +2000 +3000 C -5000 +1000 +1000 +3000 +5000 I will need full analysis (qualitative examples and references citations and examples of relative current investments of big companies.
Using image: a-1. What is the payback period for each project a-2. If you apply the payback criterion, which investment will you choose? b-1. What is the discounted payback period for each project? b-2. If you apply the discounted payback criterion, which investment will you choose? c-1. What is the NPV for each project? c-2. If you apply the NPV criterion, which investment will you choose? d-1. What is the IRR for each project? d-2. If you apply the IRR criterion, which investment will you choose? e-1. What is the profitability index for each project? e-2. If you apply the profitability index criterion, which investment will you choose? f. Based on your answers in (a) through (e), which project will you finally choose?
a. Cobre Company is considering the purchase of new equipment that will speed up the process for extracting copper. The equipment will cost $3,800,000 and have a life of 5 years with no expected salvage value. The expected cash flows associated with the project are as follows: Year Cash Revenues Cash Expenses $6,000,000 $4,800,000 6,000,000 4,800,000 3 6,000,000 4,800,000 4 6,000,000 4,800,000 6,000,000 4,800,000 b. Emily Hansen is considering investing in one of the following two projects. Either project will require an investment o $75,000. The expected cash revenues minus cash expenses for the two projects follow. Assume each project is depreciable. Year Project A Project B 1. $2,500 $22,500 2 30,000 30,000 45,000 45,000 4 75,000 22,500 75,000 22,500 c. Suppose that a project has an ARR of 30% (based on initial investment) and that the average net income of the project is $220,000. d. Suppose that a project has an ARR of 50% and that the investment is $250,000. 3.
Projects A and B are mutually exclusive. If project A, the larger project, has an approximate ERR of 20 percent and project B has an approximate ERR of 13 percent, which project is better if MARR=10 percent? O A The incremental ERR method is required to determine the better project. Neither A nor B is valid. B * For our purposes, a project is valid if its internal rate of return (IRR) is less than MARR. equal to or larger than MARR. less than 0 percent. larger than MARR.
PRINTED NAME _____________________________________________ Project X Project Y PB (payback) DPB (Discounted Payback) NPV $ PI IRR% MIRR% EAA (NUS) $ CROSSOVER RATE % NPV $ (using crossover rate) If the projects are INDEPENDENT, which would you choose? WHY? _____________________________________________________________ If the projects are MUTUALLY EXCLUSIVE, which would you choose? WHY? _____________________________________________________________ When you would be INDIFFERENT between the projects? WHY? _____________________________________________________________ SIGNATURE _____________________________________________________
Carter Company is considering three investment opportunities with the following accounting rates of return: Project Y Project X 13.25% Project Z 10.47% ARR 6.58% Use the decision rule for ARR to rank the projects from most desirable to least desirable. Carter Company's required rate of return is 8%. (1 = most desriable and 3= least desirable. Select whether each project should be accepted or rejected.) C Rank Accept/Reject Project X Project Y Project Z @ # * $ IOL 4 % 2 6 4 & 7 4 8 ( 9 ➤W O

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