For the following projects, compute NPV, IRR, MIRR, profitability index, and payback. If these projects are mutually exclusive, which one(s) should be done? If they are independent, which one(s) should be undertaken?
Answer to relevant QuestionsThe Sanders Electric Company is evaluating two projects for possible inclusion in the firm’s capital budget. Project M will require a $37,000 investment while project O’s investment will be $46,000. After-tax cash ...The Brassy Fin Pet Shop is considering an expansion. Construction will cost $90,000 and will be depreciated to zero, using straight-line depreciation, over five years. Earnings before depreciation are expected to be $20,000 ...Assume the financial manager of the Sanders Electric Company in Problem 6 believes that Project M is comparable in risk to the firm’s other assets. In contrast, there is greater uncertainty concerning Project O’s ...Briefly explain how the factors of flexibility and timing affect the mix between debt and equity capital. What implications might the pecking order and market-timing hypotheses have for an optimal capital structure? Is the weighted average cost of capital still an important concept under these hypotheses?
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