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Hotel Amazing made a list of various independent projects it wants to launch with a fixed capital budget of $5.5

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Hotel Amazing made a list of various independent projects it wants to launch with a fixed capital budget of $5.5 million. Management established that any unused portion of the fixed capital budget will earn less than the cost of capital of 12%. A summary of the independent projects are shown in the following table.

a. Select the best group of projects based on the IRR of the various projects.
b. Select the best group of projects based on the net present value (NPV) of the various projects.
c. Are the projects selected in parts a and b the same? Why or why not?
d. Which projects should Hotel Amazing implement?

Transcribed Image Text:

Project A B с D E F Initial investment $4,900,000 900,000 2,100,000 1,600,000 750,000 2,600,000 1,250,000 IRR 17% 19 18 15 20 19 21 PV of inflows at 12% $5,600,000 1,250,000 2,250,000 1,800,000 920,000 3,100,000 1,310,000

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a To select the best group of projects based on the IRR Internal Rate of Return we should choose the projects with the highest IRRs as long as the tot…View the full answer


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Related Book For  answer-question
Principles Of Managerial Finance

Principles Of Managerial Finance

ISBN: 9781292018201

14th Global Edition

Authors: Lawrence J. Gitman, Chad J. Zutter

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Question Details
Chapter # 12- Risk and Refinements in Capital Budgeting
Section: Problem
Problem: 18
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Question Posted: September 16, 2023 02:25:59
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