Survey of Accounting (Accounting I)
8th Edition
ISBN: 9781305961883
Author: Carl Warren
Publisher: Cengage Learning
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Chapter 15, Problem 9CDQ
To determine
Concept Introduction:
NPV:
To Indicate:
If projects with Similar amount of Net present value are equal in desirability
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Students have asked these similar questions
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.
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 return of 12
percent. Which of the following statements is most correct? (Assume the projects are not mutually exclusive.)
OA. Both projects have a negative net present value (NPV).
OB. Both projects should be accepted because the IRR is greater than the required return.
OC. If the required return were less than 12 percent. Project 8 would have a higher IRR than Project A
OD. Both projects should be rejected.
Given the net present value (NPV) of Project A is -$500,000, Project B is $200,000 and Project C is $250,000. Which of the project(s) can be accepted?
Chapter 15 Solutions
Survey of Accounting (Accounting I)
Ch. 15 - Prob. 1SEQCh. 15 - Management is considering a $100,000 investmentin...Ch. 15 - The expected period of time that will elapse...Ch. 15 - A project that will cost $120,000 is estimated to...Ch. 15 - Prob. 5SEQCh. 15 - What are the principal objections to the use 01the...Ch. 15 - Discuss the principal limitations of the cash...Ch. 15 - Prob. 3CDQCh. 15 - Prob. 4CDQCh. 15 - Prob. 5CDQ
Ch. 15 - Prob. 6CDQCh. 15 - Prob. 7CDQCh. 15 - Prob. 8CDQCh. 15 - Prob. 9CDQCh. 15 - Prob. 10CDQCh. 15 - Prob. 11CDQCh. 15 - Prob. 12CDQCh. 15 - Prob. 13CDQCh. 15 - Prob. 14CDQCh. 15 - Prob. 15CDQCh. 15 - Monsanto Company, a large chemical and...Ch. 15 - Average rate of return The following data are...Ch. 15 - Prob. 15.2ECh. 15 - Average rate of return—new product Arrowhead Inc....Ch. 15 - Calculate cash flows Daffodil Inc. is planning to...Ch. 15 - Prob. 15.5ECh. 15 - Cash payback method Bliss Beauty Products ¡s...Ch. 15 - Prob. 15.7ECh. 15 - Prob. 15.8ECh. 15 - Net present value method—annuity Model 99 Hotels...Ch. 15 - Prob. 15.10ECh. 15 - Prob. 15.11ECh. 15 - Prob. 15.12ECh. 15 - Prob. 15.13ECh. 15 - Average rate of return, cash payback period, net...Ch. 15 - Prob. 15.15ECh. 15 - Internal rate of return method The internal rate...Ch. 15 - Prob. 15.17ECh. 15 - Internal rate of return method—two projects Strahn...Ch. 15 - Prob. 15.19ECh. 15 - Prob. 15.20ECh. 15 - Prob. 15.21ECh. 15 - Prob. 15.22ECh. 15 - Average rate of return method, net present value...Ch. 15 - Average rate of return method, net present value...Ch. 15 - Prob. 15.2.1PCh. 15 - Cash payback period, net present value method, and...Ch. 15 - Prob. 15.3.1PCh. 15 - Prob. 15.3.2PCh. 15 - Prob. 15.3.3PCh. 15 - Prob. 15.4.1PCh. 15 - Prob. 15.4.2PCh. 15 - Prob. 15.4.3PCh. 15 - Prob. 15.5.1PCh. 15 - Prob. 15.5.2PCh. 15 - Prob. 15.5.3PCh. 15 - Prob. 15.6.1PCh. 15 - Prob. 15.6.2PCh. 15 - Prob. 15.6.3PCh. 15 - Prob. 15.6.4PCh. 15 - Capital rationing decision involving four...Ch. 15 - Prob. 15.6.6PCh. 15 - Prob. 15.6.7PCh. 15 - Prob. 15.6.8PCh. 15 - Prob. 15.1.1MBACh. 15 - Prob. 15.1.2MBACh. 15 - Financial leverage MicrosoCortrepotied (MSFT)...Ch. 15 - Prob. 15.1.4MBACh. 15 - Prob. 15.2.1MBACh. 15 - Prob. 15.2.2MBACh. 15 - Prob. 15.2.3MBACh. 15 - Prob. 15.3.1MBACh. 15 - Prob. 15.3.2MBACh. 15 - Prob. 15.3.3MBACh. 15 - Prob. 15.4MBACh. 15 - Prob. 15.5.1MBACh. 15 - Financial leverage Costco Wholesale Corporation...Ch. 15 - Prob. 15.5.3MBACh. 15 - Prob. 15.5.4MBACh. 15 - Ethics and professional conduct in business Erin...Ch. 15 - Prob. 15.2.1CCh. 15 - Prob. 15.2.2CCh. 15 - Prob. 15.2.3CCh. 15 - Prob. 15.3.1CCh. 15 - Prob. 15.3.2CCh. 15 - Qualitative issues in investment analysis The...Ch. 15 - Prob. 15.5.1CCh. 15 - Prob. 15.5.2CCh. 15 - Prob. 15.6C
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- Using the net present value method, the present value of cash inflows for Project A is P44,000 and the present value of cash inflows of Project B is P24,000. If Project A and Project B require initial investments of P40,000 and P20,000, respectively, and have the same useful life, what is the project that should be accepted assuming the projects are mutually exclusive projects?arrow_forwardUsing the profitability index, which of the following mutually exclusive projects should be accepted? Project A: NPV = $14,387; NINV = $38,260Project B: NPV = $78,121; NINV = $99,710Project C: NPV = $9,541; NINV = $11,500arrow_forwardIf the net present value (NPV) of project A is + $200, and that of project B is + $80, then the net present value of the combined project is: +$80 0 +$280 +$200arrow_forward
- If the net present value of A is +$60 and of B is +$30, then what is the net present value of the combined project?arrow_forwardProject A has an IRR of 25% and an NPV of $2 million. Project B has an IRR of 20% and an NPV of $3 million. Select all the following statements that are true. Group of answer choices If the projects are mutually exclusive, select project A only If the projects are mutually exclusive, select project B only If the projects are mutually exclusive, select both projects If the projects are independent, select project A only If the projects are independent, select project B only If the projects are independent, select both projectsarrow_forwardCompany A has an NPV (Net Present Value) of $10,000 for a proposed project, while Company B has a NPV of $5,000 for a different project. Which project is more financially attractive? A. It cannot be determined from the information given B. Company A's project C. Company B's project D. Both projects are equally attractivearrow_forward
- You are considering the following two mutually exclusive projects. The crossover rate between these two projects is crossover rate. Year Project A Project B 0 1 23 $28,000 10,500 10,500 18,500 $28,000 18,610 8,500 10,630 percent and Project_ should be accepted if the required return is greater than thearrow_forwardAssume that there are two competing projects, A and B. Project A has an NPV of $1,000 and an IRR of 15%. Project B has an NPV of $800 and an IRR of 20%. Which of the following is true? Project A should be chosen because it has a higher NPV Project B should be chosen because it has a higher IRR It is not possible to us NPV or IRR to choose between the two projects Neither projects should be chosen All of thesearrow_forwardThe net present value of four projects is given below: Project W: $24,000 Project X: $ 11,000 Project Y: $20,000 Project Z: $14,000 The four projects given above require the same amount of investment. How would you rank them using net present value (NPV) method? Group of answer choices X, Z, Y, W W, X, Y, Z W, Y, Z, XX, Y, Z, Warrow_forward
- Consider two mutually exclusive projects, A and B, whose costs and cash flows are shown in the following table: Year Project A Project B 1 $(15,000) $(22,840) 2 9,000 8,000 3 8,000 8,000 4 2,500 8,000 5 3,000 8,000 Calculate the cross over rate. Please use equations not just excelarrow_forwardProject S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?arrow_forwardUnder what conditions might you find more thanone IRR for a project? How would you decidewhether or not to accept the project? If you werecomparing two mutually exclusive projects, onewith a single IRR of 12% and the other with two different IRRs of 10% and 15%, how should youchoose between the projects?arrow_forward
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