Question: please answer both questions and show work directly on chegg , no attachments QUESTION 1 A firm is considering Projects S and L, whose cash
please answer both questions and show work directly on chegg , no attachments
QUESTION 1
A firm is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO wants to use the IRR criterion, while the CFO favors the NPV method. You were hired to advise the firm on the best procedure. If the wrong decision criterion is used, how much potential value would the firm lose?
| WACC: | 6.50% |
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| 0 | 1 | 2 | 3 | 4 |
| CFS | -$1,100 | $180 | $380 | $580 | $980 |
| CFL | -$1,100 | $865 | $465 | $265 | $165 |
QUESTION 4
Anderson Systems is considering a project that has the following cash flow and WACC data. What is the project's NPV? Should the firm accept the project?
| WACC: | 12.00% |
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| Year | 0 | 1 | 2 | 3 |
| Cash flows | -$1,000 | $200 | $400 | $800 |
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