Question: please do not use excel Scale differences: Two capital investment projects have the following forecasted cash flows: a. Compute the NPV of both projects at
Scale differences: Two capital investment projects have the following forecasted cash flows: a. Compute the NPV of both projects at a 10 percent cost of capital. b. What is the IRR of Project B? (Hint: it's above 15\%) c. Use a timeline to draw the incremental cash flow stream. d. If the projects are independent, based on the IRR rule, which project(s), if any, should be selected? e. If the projects are independent, based on the NPV rule, which project(s), if any, should be selected? f. If the projects are contingent (you can't take one unless you also take the other) what should the firm do? g. What in the incremental IRR to the nearest whole percent? (Hint: the IRRs of the two projects should give you a give you a fairly good idea of where this IRR is situated) h. What is the NPV of both projects at a zero percent discount rate? i. Based on you answers above, draw the NPV profiles of both projects. On your diagram, be certain to show the NPV-axis and k-axis intercepts as well as the crossover discount rate. Show the area of project evaluation conflict
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
