Analyzing two mutually exclusive projects

Assignment Help Financial Management

Reference no: EM131020106

A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below. Project S: -1,500 (Year 0), 1000 (Year 1), 560 (Year 2), 50 (Year 3). Project L: -1,200 (Year 0), 0 (Year 1), 600 (Year 2), 1,500 (Year 3). The company’s cost of capital is 12 percent. Project S’s IRR is . Project L’s IRR is.

Reference no: EM131020106

Questions Cloud

What is the effective interest rate per year : A borrower accepts a loan of $550 and is required to pay $42 at the end of each week for 16 weeks. Find the interest rate per week. What is the nominal interest rate per year? What is the effective interest rate per year?

Use daily compounding-find the price of call option on stock : The current price of a stock is $16. In 6 months, the price will be either $18 or $13. The annual risk-free rate is 4%. Find the price of a call option on the stock that has an strike price of $14 and that expires in 6 months. (Hint: Use daily compou..

Calculate NPV and IRR for the investment : Calculate NPV and IRR for the following investment. Initial investment = $1,000,000 machine, the project term is 6 years, sales for year 1 are estimated to be $1,000,000, and will grow by 7.5% per year through year 5, sales for year 6 = $500,000, var..

Calculate the HPR and profit amount on your equity position : On March 20, 2012 you bought 1,000 shares of Starwood Hotels & Resorts Worldwide Inc. (HOT) at $14.00 on 50% margin. The margin loan carries a 8% annual interest rate, paid every 3 months from the day of the purchase. You sold the stock on September ..

Analyzing two mutually exclusive projects : A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below. Project S: -1,500 (Year 0), 1000 (Year 1), 560 (Year 2), 50 (Year 3). Project L: -1,200 (Year 0), 0 (Year 1), 600 (Year 2), 1,500 (Year 3). The company..

Bond yield and after-tax cost of debt : A company's 8% coupon rate, semiannual payment, $1,000 par value bond that matures in 30 years sells at a price of $566.43. The company's federal-plus-state tax rate is 35%. What is the firm's after-tax component cost of debt for purposes of calculat..

What is the role of good cash flow estimates : Assume that you are the CFO of a local YMCA. You and your administrative team are considering making an investment in a day care facility to meet the ongoing child care needs of your members. What would your decision be if the NPV were negative? What..

Cultural problems with opening a business : Cultural problems with opening a business in Mexico and United Kingdom. Discuss how your firm can deal with these problems in order to be successful. Note the cultural differences and similarities between the two countries selected.

Earn an effective annual return on its consumer loans : Magnus Credit Corp. wants to earn an effective annual return on its consumer loans of 16.5 percent per year. The bank uses daily compounding on its loans. Required: What interest rate is the bank required by law to report to potential borrowers?

User Account

All Pages