A) Consider the following two mutually exclusive projects.

Whichever project you choose., if any, require a return of 13% on your investment.

A1) if you apply the payback criterion, which investment will you choose? Why?

A2 ) If you apply the NPV criterion., which investment will you choose? Why?

A3 ) If you apply the IRR. Criteria, which investment will you choose? Why?

A4 ) If you apply the Profitability index criterion., which investment will you choose? Why?

A5) Based on your answers in part A1 through A4. Which project will you finally choose? Why?

B) Brush Company is presented with the following two mutually exclusive projects. The required return for both projects is 15%.

B1) what is the IRR for each project?

B2) What is the NPV for each project?

B3). Which, if either, of the projects should the company accept?

C) Coore Manufacturing has the following two possible projects. The required rate of return is 12%.

C1) What is the profitability index for each project?

C2) What is the NPV for each project?

C3) Which of either, of the project, should the company accept?

D) The Yurdone Corporation wants to set up a private Cemetery business. According to the CFO, business is looking up. As a result, the Cemetery project will provide a net cash flow of $164,000 for the firm during the first year, and cash flows are projected to grow at a rate of 4.7% per year forever. The project requires an initial investment $1,825,000.

D1) if the company requires a return of 12% on such undertakings, should the Cemetery business be started?

D2) The company is somewhat unsure about the assumption of a 4.7% growth rate in its cash flow. At what constant growth rate would the company just break even? If it still required a return of 12% on its investment?

Year 0 1 CF(a) -245,000 34,000 49,000 51,000 325,000 CF(B) -53,000 31,900 21,800 17,300 16,200 B 4 Year b hi CF(a) -140,000 61,500 73,400 68,100 40,500 CF(B) -359,000 159,300 168,400 154,800 110,400 2 B lear 1 2 CF(a) -47,600 23,900 18,600 20,700 14,600 CF(B) -81,000 34,000 32,800 30,500 27,300 4