Compute the internal rate of return on both projects

Assignment Help Financial Management

Reference no: EM13928271

Note the following information on two mutually exclusive projects under consider- ation by Wang Food Markets, Inc.

Annual Cash Flows

Year	A	B
0	-$30,000	-$60,000
1	10,000	20,000
2	10,000	20,000
3	10,000	20,000
4	10,000	20,000
5	10,000	20,000

Wang requires a 14 percent rate of return on projects of this nature.

a. Compute the NPV of both projects.

b. Compute the internal rate of return on both projects.

c. Compute the profitability index of both projects.

d. Compute the payback period on both projects.

e. Which of the two projects, if either, should Wang accept? Why?

Reference no: EM13928271

Questions Cloud

What ways of enterprise information architecture complements : What are the most important ways that Enterprise Information Architecture (EIA) complements and strengthens the larger Enterprise Architecture (EA) definition and analysis, and why? What do you believe the greatest advantages of using the EIA Refe..

Financial management challenges and ethics : Financial Management Challenges and Ethics Find at least two articles from the ProQuest database that highlight and discuss two of the biggest challenges facing financial managers today.

Primary disadvantage of accrual accounting : The primary disadvantage of accrual accounting is that A. it does not match revenues and expenses in the period in which they are incurred B. it does not appropriately measure accounting profit

Describe the type of coverage provided : For each of the following coverages briefly describe the type of coverage provided and give an example of a loss that would be covered.

Compute the internal rate of return on both projects : Compute the internal rate of return on both projects. Compute the profitability index of both projects. Compute the payback period on both projects.

What are break-even point maximum profit-loss of strategy : Consider a 1-year (long) strangle on the Nasdaq-100 with strikes of 4,000 and 5,000. The index spot level is 4,655 and its volatility is 20%. The risk-free rate is 4% and the index pays a dividend yield of 2%. Use a 6-step binomial tree to price this..

What you know about correlations : Tell us a little about Dr. Hirsch's research. What did he do? What did he find? Why might Dr. Hirsch's research be important? Based on what you know about correlations, what problems do you see with Dr. Hirsch's research

Understanding of the reading-implications of new knowledge : The final case study should demonstrate understanding of the reading as well as the implications of new knowledge. The paper should integrate Readings and Resources and class discussions into work and life experiences. It may include explanation a..

All options are european-style-what is the theoretical price : AIG stock sells at $61.21 and the 6-month 60-strike put is selling at $3.20. The risk-free rate is 4% and the stock will pay a dividend of $0.30 in 3 months. We assume that all options are European-style. What is the theoretical price of the 6-month ..

User Account

All Pages