The excel sheet provides yearly cash flow details of 9 projects (A to I). Assume that...

  

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The excel sheet provides yearly cash flow details of 9 projects (A to I). Assume that the discounting rate for the purpose of this exercise is 10%. Answer the following questions with regards to these projects. 1. Project D has negative IRR. How will you "solve" this problem of negative IRR? 2. Would you choose Project F based on the NPV Rule? Would your decision change if you worked on the IRR Rule ? Often a firm may have to choose only one among two or more projects. This can be due to either capital rationing or the projects being mutually exclusive. Answer the next few questions based on the information given in each question. What will be your decision under the following circumstances? 1. Project A and Project C are mutually exclusive projects, because the same division of the firm has planned them with some common resources. Which project will you choose and how? 2. You get some additional information that Projects H and Project I are also mutually exclusive projects. What project will you choose based on the NPV rule? What project will you choose based on the IRR rule? What additional logic/tools will you use to choose a project? Are you making any assumptions to reach the answer? 3. The firm has mentioned to you that it does not have unlimited funds to finance all the projects listed. Given it has limited money, it wants to select projects which deliver the highest "bang for buck". Between projects B and G, it can choose only one project. What project will you choose and how? Project # 0 1 2 3 4 5 6 7 8 A -76000 12540 12540 12540 12540 12540 20000 12540 38000 B -38000 15000 12000 11218 12000 15000 C -76000 30000 15000 20000 41385 D -90000 148000 98000 -145000 E -76000 63308 12692 6270 F 5000 -16500 13750 G H -19431 -76000 13390 -13300 9490 10000 -2280 2280 13300 26600 45600 85500 I -76000 45600 30000 11400 3420 2660 2000 1000 The excel sheet provides yearly cash flow details of 9 projects (A to I). Assume that the discounting rate for the purpose of this exercise is 10%. Answer the following questions with regards to these projects. 1. Project D has negative IRR. How will you "solve" this problem of negative IRR? 2. Would you choose Project F based on the NPV Rule? Would your decision change if you worked on the IRR Rule ? Often a firm may have to choose only one among two or more projects. This can be due to either capital rationing or the projects being mutually exclusive. Answer the next few questions based on the information given in each question. What will be your decision under the following circumstances? 1. Project A and Project C are mutually exclusive projects, because the same division of the firm has planned them with some common resources. Which project will you choose and how? 2. You get some additional information that Projects H and Project I are also mutually exclusive projects. What project will you choose based on the NPV rule? What project will you choose based on the IRR rule? What additional logic/tools will you use to choose a project? Are you making any assumptions to reach the answer? 3. The firm has mentioned to you that it does not have unlimited funds to finance all the projects listed. Given it has limited money, it wants to select projects which deliver the highest "bang for buck". Between projects B and G, it can choose only one project. What project will you choose and how? Project # 0 1 2 3 4 5 6 7 8 A -76000 12540 12540 12540 12540 12540 20000 12540 38000 B -38000 15000 12000 11218 12000 15000 C -76000 30000 15000 20000 41385 D -90000 148000 98000 -145000 E -76000 63308 12692 6270 F 5000 -16500 13750 G H -19431 -76000 13390 -13300 9490 10000 -2280 2280 13300 26600 45600 85500 I -76000 45600 30000 11400 3420 2660 2000 1000