1) Projects 1 and 2 have similar outlays, although the patterns of future cash flows are different....
Question:
1) Projects 1 and 2 have similar outlays, although the patterns of future cash flows are different. The cash flows as well as the NPV and IRR for the two projects are shown below. For both projects, the required rate of return is 10 percent and there is no capital rationing.
Project 1 | Project 2 | |
0 | -50 | -50 |
1 | 20 | 0 |
2 | 20 | 0 |
3 | 20 | 0 |
4 | 20 | 100 |
What are the NPVs of Projects 1 and 2?
A. | 13.40 and 18.30 | |
B. | 11.25 and 9.52 | |
C. | 39.25 and 45.25 | |
D. | 18.52 and 21.36 | |
2) Projects 1 and 2 have similar outlays, although the patterns of future cash flows are different. The cash flows as well as the NPV and IRR for the two projects are shown below. For both projects, the required rate of return is 10 percent and there is no capital rationing.
Project 1 | Project 2 | |
0 | -50 | -50 |
1 | 20 | 0 |
2 | 20 | 0 |
3 | 20 | 0 |
4 | 20 | 100 |
What are the IRRs of the two projects?
A. | 21.86% and 14.62% | |
B. | 21.86% and 18.92% | |
C. | 17.35% and 13.36% | |
D. | 15.36% and 21.86% |
3) Projects 1 and 2 have similar outlays, although the patterns of future cash flows are different. The cash flows as well as the NPV and IRR for the two projects are shown below. For both projects, the required rate of return is 10 percent and there is no capital rationing.
Project 1 | Project 2 | |
0 | -50 | -50 |
1 | 20 | 0 |
2 | 20 | 0 |
3 | 20 | 0 |
4 | 20 | 100 If the two projects are mutually exclusive what is the appropriate decision ? |
A. | Project 1 | |
B. | Both | |
C. | None | |
D. | Project 2 |
4) Projects 1 and 2 have similar outlays, although the patterns of future cash flows are different. The cash flows as well as the NPV and IRR for the two projects are shown below. For both projects, the required rate of return is 10 percent and there is no capital rationing.
Project 1 | Project 2 | |
0 | -50 | -50 |
1 | 20 | 0 |
2 | 20 | 0 |
3 | 20 | 0 |
4 | 20 | 100 If the two projects are independent what is the appropriate decision? |
A. | Project 1 | |
B. | None | |
C. | Project 2 | |
D. | Both |
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen