1) You are considering the following mutually exclusive projects: (15pts) 1 3 4 Project A -400 50 50 50 230 230 Project B -600 300 300 50 50 50 if the firm required return (WACC) is 10%: a. What is the NPV of project A? b. What is the IRR of project A? C. What is the NPV of project B? d. What is the IRR of project B? e. Which one you must select?

1) You are considering the following mutually exclusive projects: (15pts) 1 3 4 Project A -400 50 50 50 230 230 Project B -600 300 300 50 50 50 if the firm required return (WACC) is 10%: a. What is the NPV of project A? b. What is the IRR of project A? C. What is the NPV of project B? d. What is the IRR of project B? e. Which one you must select?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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What is the expected NPV of the following decision tree? The net flow and associated probability is shown above and below each branch for the two-year project. a. -R18.72m b. -R5.56m c. R5.00m d. R16.12m
Consider two project alternatives, project I and project II, with their payoffs and their associated probabilities outlined in the following table: Project I Project II Payoff 10 15 20 Probability 0.1 0.8 0.1 Payoff 1. Compute RRI for each project; 2. Would you select project I or project II? Why. 5 10 14 Probability 0.2 0.3 0.5
5.6 Nimby plc is considering two mutually exclusive projects: Delphi and Oracle. The possible NPVS for each project and their associated probabilities are as follows: Delphi Oracle NPV Probability of occurrence NPV Probability of occurrence £m £m 20 0.2 30 0.5 40 0.6 40 0.3 60 0.2 65 0.2 Required: (a) Calculate the expected net present value and the standard deviation associated with each project. (b) Which project would you select and why? State any assumptions you have made in coming to your conclusions. (c) Discuss the limitations of the standard deviation as a measure of project risk.
3e.a.Determinethe payback period for each b.Calculatethe net present value (NPV) for each c.Calculatethe profitability index (PI) for each project. d.Calculatethe internal rate of return (IRR) for each e.Basedon ALL your answers above, explain briefly which project should be Note: i just need (e) no question answer not all no need excle formula , thank you
Answer this question as it is pertaining to two MUTUALLY EXCLUSIVE projects on the following figure. Given r=6%, which project would you choose if you decide to use the internal rate of return (IRR) as the criterion? Group of answer choices Project A Project B Neither Either
Q.6. A project with an initial outlay of OMR1m has a 0.3 probability of producing a return of OMR800,000 in year 1 and a 0.7 probability of delivering a return of OMR600,000 in year 1. If the OMR800,000 result occurs then the second year could return either OMR700,000 (probability of 0.4) or OMR300,000 (probability of 0.6). If the OMR600,000 for year 1 occurs then either OMR600,000 (probability of 0.8) or OMR400,000 (probability of 0.2) could be received in the second year. All cash flows occur on anniversary dates. The discount rate is 11 per cent. (a) Calculate the expected return and standard deviation. (b) What is the type of probability displayed in this question?
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
a. They payback period of project A is ___ years (round to two decimal places) The payback period of project B is ____ years. (round to two decimal places) According to the payback method, which project should the firm choose? b. The NPV of project A is $___ The NPV of project B is $___ c. The IRR of project A is ___ The IRR of project B is ___ d. Make a reccomendation
Observe the graph below and identify the internal rate of return. Assume that the discount rate is 8%. What is the net present value of the project? Briefly explain if the project is viable or not? NPV 50000 40000 30000 20000 10000 4 10 12 14 16 18 20 22 24 • 26 28 -10000 discount rate Edit View Insert Format Tools Table
Which project should you invest in according to the NPV and IRR? Project A NPV@ 10% WACC = $135 and IRR 22% Project B NPV @ 10% WACC = $17 and IRR 21% Project C NPV @ 10% WACC = $146 and IRR 23% O a Project A O b. Cannot determine Oc. Project C O d. Project B O e. Project A or B
You are considering the following two mutually exclusive investments: Project Year 0 Year 1 Year 2 A -$80 0 $120 B -$40 $28 $28 Which project has the higher NPV if the required rate of return is 5%?
If a project has a profitability index of 1.20, then the project's internal rate of return is O equal to the discount rate. O less than the discount rate. O greater than the discount rate. O equal to 20%. Save for Later O 10 C Attempts: 0 of 1 used F10 Submit Ans

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