IF Homework Set 4

IF Homework Set 4 - BUSFIN 1030 Introduction to Finance...

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Unformatted text preview: BUSFIN 1030 Introduction to Finance Homework Set 4 1. Consider the cash flows of two mutually exclusive projects in the table below: t Project A Project B-$2,500-$1,500 1 $897 $500 2 $1,390 $750 3 $1,093 $1,000 4 $1,309 $1,250 a. Calculate the net present value of these projects if the discount rate is 7%. Which project should be preferred? b. Calculate the net present value of these projects if the discount rate is 13%. Which project should be preferred? c. Calculate the internal rate of return of these projects and their crossover rate. Then state the correct decision rule based on internal rate of return. 2. Western Digital is considering the launch of 1TB version of its Passport external drives. The company spent $50 million to develop the product and paid $2 million to a marketing research company to explore the products marketability. It is estimated that this investment is going to last for 4 years. Sales revenue from the investment is expected to be $600 million, $800 million, $900 million and $400 million in years 1...
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This note was uploaded on 10/16/2009 for the course BUSFIN 1030 taught by Professor Zutter during the Fall '08 term at Pittsburgh.

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IF Homework Set 4 - BUSFIN 1030 Introduction to Finance...

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