Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows The firms cost of capital is 10 percent a According to the net present value method of capital budgeting, which investment(s) should the firm make b According to the internal rate of return method...

a Net present value of Q NPV S 13001 1 1000 118170 1000 18170 Net present value of S 386PVAIF 10I 4N ...

Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The

Question:

Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm€™s is 10 percent.

a. According to the net present value method of capital budgeting, which investment(s) should the firm make?
b. According to the internal rate of return method of capital budgeting, which investment(s) should the firm make?
c. If Q is chosen, the $1,300 can be reinvested and earn 12 percent. Does this information alter your conclusions concerning investing in Q and
S? To answer, assume that S€™s cash flows can be reinvested at its internal rate of return. Would your answer be different if S€™s cash flows were reinvested at the cost of capital (10 percent)?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...