15. What is the project's payback? 16. Assume the required return is 10%. What is the project's NPV? This study resource was shared via CourseHero.com
17. The firm's required rate of return is uncertain at this time, so you construct NPV profiles to assist in the final decision. At what discount rate do the profiles for Machines B and O cross? 18. If the required rate of return for both projects is 14 percent at the time the decision is made, which project would you choose? 19. Braun Industries is considering an investment project which has the following cash flows: Year Cash Flow 0 1 2 3 4 -$1,000 400 300 500 400 The company's WACC is 10 percent. What is the project's payback, internal rate or return, and net present value? 20. When is Project B more lucrative than Project A? (Hint, calculate the NPV profile cross-over rate) Project A Project B YearCash FlowCash Flow0 -$100,000 -$110,000 1 60,000 20,000 2 40,000 40,000 3 20,000 40,000 4 10,000 50,000 21. Polk Products is considering an investment project with the following cash flows: Year Cash Flow 0 1 2 3 4 -$100,000 40,000 90,000 30,000 60,000 The company has a 10 percent cost of capital. What is the project’s discounted payback? This study resource was shared via CourseHero.com
22. An investment project costs $8,000 and has annual cash flows of $1,900 for six years. Calculate payback and discounted payback for this project assuming a cost of capital of 10%. 23. The director of capital budgeting for Giant Inc. has identified two mutually exclusive projects, L and S, with the following expected net cash flows: Expected Net Cash Flows Year Project L Project S 0 1 2 3 -$100 10 60 80 -$100 70 50 20 The company’s cost of capital is 8%. Which should be chosen? 24. Bumble’s Bees, Inc. has identified the following two mutually exclusive projects: Year Project A Cash flow Project B Cash flow 0 1 2 3 -$5,000 1,700 2,500 3,000 -$5,000 3,000 2,000 1,975 When is project B more lucrative than Project A? (That is, over what range of costs of capital does Project B have a higher NPV than Project A?) 25. The director of capital budgeting for Giant Inc. has identified two mutually exclusive projects, L and S, with the
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