Consider the capital budgeting decision to be made with the following data about 2 competing projects. Project A has an NPV of $250, and IRR of 2% and a payback period of 3 years. Project B has an NPV of -$1000, but an IRR of 3% and a payback period of 2 years 10 months. Which project(s) would be chosen on an independent basis?

In light of the impact of the coronavirus pandemic, Dawson's Bank, which is based in Hobart, would like to set up a reserve fund. The fund will earn an interest rate of 3% per annum. If the fund pays a fixed amount of $25 million to the bank annually for an infinite period, starting one year from today, how much does Dawson's Bank need in the fund today?

On 1st April 2019, Joe purchased a zero-coupon bond that had just been issued by Rangoon Retailers Ltd. At issue, the bonds had a 10-year term to maturity. The face value per bond is $1,000.. At 1st April 2019, the bonds were priced in the market at a market rate of interest of 6% p.a. effective. One year later, on 1st April 2020, Joe sold the bond. On 1st April 2020 the bonds were being priced at a market rate of interest of 5.5% p.a. effective. What was Joe's return for the year?

Answer rating: 100% (QA)

To choose a project on an independent basis we should select the one with the higher NPV In this cas... View the full answer