Question: A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below:The company's cost of capital is 12 percent, and
A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below:The company's cost of capital is 12 percent, and it can get an unlimited amount of capital at that cost. What is the regular IRR (not MIRR) of the better project, i.e., the project which the company should choose if it wants to maximize its stock price?
| a. | 12.00% | |
| b. | 15.53% | |
| c. | 18.62% | |
| d. | 19.08% | |
| e. | 20.46% |
Green Grocers is deciding among two mutually exclusive projects. The two projects have the following cash flows:
| Project A | Project B | |
| Year | Cash Flow | Cash Flow |
| 0 | -$50,000 | -$30,000 |
| 1 | 10,000 | 6,000 |
| 2 | 15,000 | 12,000 |
| 3 | 40,000 | 18,000 |
| 4 | 20,000 | 12,000 |
The company's cost of capital is 10 percent (WACC = 10%). What is the net present value (NPV) of the project with the highest internal rate of return (IRR)?
| a. | $ 7,090 | |
| b. | $ 8,360 | |
| c. | $11,450 | |
| d. | $12,510 | |
| e. | $15,200 |
Braun Industries is considering an investment project which has the following cash flows:
| Year | Cash Flow |
| 0 | -$1,000 |
| 1 | 400 |
| 2 | 300 |
| 3 | 500 |
| 4 | 400 |
The company's WACC is 10 percent. What is the project's payback, internal rate of return, and net present value?
| a. | Payback = 2.4, IRR = 10.00%, NPV = $600. | |
| b. | Payback = 2.4, IRR = 21.22%, NPV = $260. | |
| c. | Payback = 2.6, IRR = 21.22%, NPV = $300. | |
| d. | Payback = 2.6, IRR = 21.22%, NPV = $260. | |
| e. | Payback = 2.6, IRR = 24.12%, NPV = $300. |
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