Assume that this firm has cost of capital

Assignment Help Financial Management

Reference no: EM131847913

Consider the following projects and information about each

Project Initial investment ($millions) NPV($millions) IRR(%)

C 40 16 13

D 46 12 10

E 12 4 18

F 24 8 16

G 90 24 12

Assume that this firm has a cost of capital of 9% for these projects and has a capital budgeting limit of $120 million. Projects are independent.

(a) If you use the IRR criterion, how should you choose between these projects and which projects should you accept?

(b) If you use the NPV criterion, how should you choose between projects and which projects should you accept?

(c) Explain why you end up selecting different combination of projects. Which decision tool should you use to make the decision? Why?

Reference no: EM131847913

Questions Cloud

Making annual deposits in that account : if from now on he will be making annual deposits in that account in the amount of $4,912.05 at the end of each year?

Well-known financial writer andrew tobias argues : Well-known financial writer Andrew Tobias argues that he can earn 177 % per year buying wine by the case.

Make you indifferent between buying and leasing : What break-even resale price in three years would make you indifferent between buying and leasing?

The amount of money she will have to invest today : If Sarah can earn 7% annually for the next 26 years, the amount of money she will have to invest today is $______.

Assume that this firm has cost of capital : Assume that this firm has a cost of capital of 9% for these projects and has a capital budgeting limit of $120 million. Projects are independent.

Dingbat should or should not implement refunding operation : Briefly explain why Dingbat should or should not implement a refunding operation, ignoring brokerage costs to issue or redeem.

Account earning an annual rate of return : If you deposit $3300 today into an account earning an annual rate of return of 6%, what would your account be worth in 30 years?

Calculate the equal annual retirement payment : Calculate the equal annual retirement payment for a 20 year retirement after completing a 46 year employment.

Amazon financial performance the past three years : What is your assessment of Amazon’s financial performance the past three years?

User Account

All Pages