a. If the firm is not capital constrained and the projects in Table 1 are mutually exclusive,
Question:
a. If the firm is not capital constrained and the projects in Table 1 are mutually exclusive, which project should the firm undertake using the following criteria?
i. NPV
ii. IRR
iii. Payback period
iv. Discounted payback period
v. Profitability index
b. Are any of your recommendations, based on the above criteria, contradictory? Explain how that would bepossible.
Transcribed Image Text:
Table 1 Annual cash flows (all amounts in $millions) Year 0-1,000 Year 1 Year 21,000 Year 31,200 Year 42,500 Year 5 3,000 Project A Project B Project C Project D Project E Project F Project G 5,000 4,800 1,000 6,000 3,000 -4,000 2,000 1,500 1,000 300 500 200 8,000 2,000 2,000 8,000 2,000 2,500 -5,000 2,000 3,000 5,000 1,000 3,000 10,000 3,000 2,000 1,000 1,000 3,000 3,000 1,500 1,200 300 500
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a Take the project with the greatest NPV E b Take the project with the greatest IRR that is ...View the full answer
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Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
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