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Thomson Electric Systems is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's projected NPV can be negative, in which case it will be rejected.
WACC = 10%
Year: 0 1 2 3
Cash flows: -$1,000 $500 $500 $500 |
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Definition
Calculator CFi
I/YR = 10
Press NPV
=$243.43 |
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Blanchford Enterprises is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
Year: 0 1 2 3
Cash flows: -$1,000 $450 $450 $450
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Calculator
CFi
Then press IRR
=16.65 |
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Tapley Dental Associates is considering a project that has the following cash flow data. What is the project's payback?
Year: 0 1 2 3 4 5
Cash flows: -$1,000 $300 $310 $320 $330 $340
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Edison Electric Systems is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's projected NPV can be negative, in which case it will be rejected.
WACC = 10%
Year: 0 1 2 3
Cash flows: -$1,000 $450 $460 $470
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Definition
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Edison Electric Systems is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
Year: 0 1 2 3
Cash flows: -$1,000 $450 $470 $490
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Blanchford Enterprises is considering a project that has the following cash flow and WACC data. What is the project's discounted payback?
WACC = 10%
Year: 0 1 2 3
Cash flows: -$1,000 $500 $500 $500
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Two mutually exclusive projects have the following projected cash flows:
Project A Project B
Year Cash Flow Cash Flow
0 -$50,000 -$50,000
1 15,625 0
2 15,625 0
3 15,625 0
4 15,625 0
5 15,625 99,500
If the required rate of return on these projects is 10%, which would be chosen and why?
a. Project B because it has the higher NPV.
b. Project B because it has the higher IRR.
c. Project A because it has the higher NPV.
d. Project A because it has the higher IRR.
e. Neither, because both have IRRs less than the cost of capital.
f. Both, because each has an NPV greater than 0.
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| a. Project B because it has the higher NPV. |
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<!-- @page { size: 8.5in 11in; margin: 0.79in } P { margin-bottom: 0.08in } -->
Two independent projects have the following projected cash flows:
Project A Project B
Year Cash Flow Cash Flow
0 -$50,000 -$50,000
1 15,625 0
2 15,625 0
3 15,625 0
4 15,625 0
5 15,625 99,500
If the required rate of return on these projects is 10%, which would be chosen and why?
a. Project B because it has the higher NPV.
b. Project B because it has the higher IRR.
c. Project A because it has the higher NPV.
d. Project A because it has the higher IRR.
e. Neither, because both have IRRs less than the cost of capital.
f. Both, because each has an NPV greater than 0.
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| f. Both, because each has an NPV greater than 0. |
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