Question: Acme Mfg is considering two projects, A & B, with cash flows as shown below: Period CFA CFB 0 -100000 1 20000 60000 2 20000

Acme Mfg is considering two projects, A & B, with cash flows as shown below:

Period CFA CFB
0 -100000
1 20000 60000
2 20000 25000
3 20000 25000
4 20000 25000

The opportunity cost of capital for A is 14 percent. The opportunity cost of capital for B is 10 percent.

QUESTIONS: (15 Marks)

a. Calculate the NPV for each project. ?

b. Calculate the IRR for each project. ?

c. Which project(s) should be accepted in each of the following situations:?

(1) The projects are mutually exclusive and there is no capital constraint.

(2) The projects are independent and there is no capital constraint.

d. Explain why the cost of capital for A might be higher than for B. ?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

1 6. MISC.: Acme Mfg is considering two projects, A & B, with cash flows as shown below: period CFA CFB 0 -50,000 -100,000 20,000 60,000 2 20,000 25,000 3 20,000 25,000 4 20,000 25,000 The...

Q:

Please Solve the following in details ! Acme Mfg. is considering two projects, A & B, with cash flows as shown below: period CFA CFB 0 -80,000 -100,000 1 20,000 60,000 2 30,000 25,000 3 20,000 25,000...

Q:

Acme Mfg. is considering two projects, A & B, with cash flows as shown below: period CFA CFB 0 -80,000 -100,000 1 20,000 60,000 2 30,000 25,000 3 20,000 25,000 4 20,000 25,000 The opportunity cost of...

Q:

Acme Mfg. is considering two projects, A & B, with cash flows as shown below: period CFA CFB 0 -80,000 -100,000 1 20,000 60,000 2 30,000 25,000 3 20,000 25,000 4 20,000 25,000 The opportunity cost of...

Q:

Acme Mfg. is considering two projects, A & B, with cash flows as shown below: period CFA CFB 0 -80,000 -100,000 1 20,000 60,000 2 30,000 25,000 3 20,000 25,000 4 20,000 25,000 The opportunity cost of...

Q:

Acme Mfg is considering two projects, A & B, with cash flows as shown below: period CFA CFB 0 -50,000 -100,000 1 20,000 60,000 2 20,000 25,000 3 20,000 25,000 4 20,000 25,000 The opportunity cost of...

Q:

Acme Mfg is considering two projects, A & B, with cash flows as shown below: Year CFA CFB 0 ($ 50,000) ($ 100,000) 1 $ 20,000 $ 60,000 2 $ 20,000 $ 25,000 3 $ 20,000 $ 25,000 4 $ 20,000 $ 25,000 The...

Q:

4. Acme Mfg is considering two projects, A & B, with cash flows as shown below: Year CFA ($) CFB ($) o (50,000) (100,000) 1 20,000 60,000 2 20,000 25,000 3 20,000 25,000 4 20,000 25,000 The...

Q:

The star co. considering two projects, A & B, with cash flows as shown below: period CFA CFB 0 -50,000 -100,000 1 20,000 60,000 2 20,000 25,000 3 20,000 25,000 4 20,000 25,000 a. Calculate the NPV...

Q:

FPT is considering two projects, A & B, with cash flows as shown below: year CFa CFb 0 -50,000 -100,000 1 20,000 60,000 2 20,000 25,000 3 20,000 25,000 4 20,000 25,000 The opportunity cost of capital...

Q:

A landscaper has planted a rectangular garden that measures 8 feet by 5 feet. He has ordered 1 cubic yard (27 cubic feet) of stones for a border along the outside of the garden. If the border needs...

Q:

A toy cannon uses a spring to project a 5.30-g soft rubber ball. The spring is originally compressed by 5.00 cm and has a force constant of 8.00 N/m. When the cannon is fired the ball moves 15.0 cm...

Q:

Question 3 1 pts If you are promised a nominal return of 1 2 % on a 1 - year investment, and you expect the rate of inflation to be 3 % , what real rate do you expect to eam? 8 . 7 4 % - 2 . 0 . 9 ....

Q:

Add "Viggo Mortenslet cast = new Map ( ) ;en " to the cast as the key, with value "Aragorn".