BUS5440 Copy8B - Question Moerdyk Co is considering Projects S and L whose cash flows are shown below These projects are mutually exclusive equally

BUS5440 Copy8B - Question Moerdyk Co is considering...

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Question: Moerdyk & Co. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR, how much value will be forgone? Note that under certain conditions choosing projects on the basis of the IRR will not cause any value to be lost because the project with the higher IRR will also have the higher NPV, i.e., no conflict will exist. WACC:10.00%Year01234CFS-$1,025$650$450$250$50CFL-$1,025$100$300$500$700A$5.47B$6.02C$6.62D$7.29E$7.82Question: Dobson Dairies has a capital structure which consists of 60 % long-term debt and 40 % commonstock. The company’s CFO has obtained the following informationThe before-tax yield to maturity on the company’s bonds is 8 %The company’s common stock is expected to pay a $3.00 dividend at year end (D1= $3.00), and the dividend is expected to grow at a constant rate of 7 % a year. The common stock currently sells for $60 a shareAssume the firm will be able to use retained earnings to fund the equity portion of its capital budget

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