Evaluating two mutually exclusive investment projects

Assignment Help Financial Management

Reference no: EM132063912

1. Andrew is evaluating two mutually exclusive investment projects (he can choose only one project). He has calculated the net present value (NPV) and internal rate of return (IRR) for each project: Project 1: NPV = $1500; IRR = 15% Project 2: NPV = $923; IRR = 12% Andrew should make which of the following recommendations concerning the two projects only based on NPV?

a. Project 1 b. Project 2 c. Both d. None e. Insufficient information

2. Which of the following statements is false?

a. Present value and interest rates are inversely related assuming interest rate is always positive

b. If compounding frequencies increase, future value increases

c. When expected rate of return increases, the price of investment also increases

d. Before-tax WACC is lower than after-tax WACC

Reference no: EM132063912

Questions Cloud

What is the yield to maturity on bond : If the price of the bond is $1,196.80, what is the yield to maturity on the bond? Assume interest is paid annually.?

Project will produce after-tax operating cash inflows : A project will produce after-tax operating cash inflows of $3,200 a year for 5 years.

You plan to save for this purchase using sinking fund : You plan to save for this purchase using a sinking fund that compounds quarterly, and earns a 4.5% annual rate.

What after tax rate of return must the company : Assuming a 40% tax rate what after tax rate of return must the company earn on its investments? After tax WACC?

Evaluating two mutually exclusive investment projects : Andrew is evaluating two mutually exclusive investment projects (he can choose only one project).

Differences between the explanations of the two options : Compute the implied volatilities of both options on both dates. Discuss the main differences between the P&L explanations of the two options.

About the stock price future movements : What would be a simple options strategy to exploit your conviction about the stock price’s future movements?

What will be the prepayment penalty if repaid in ten-years : What will be the prepayment penalty if repaid in 10-years? What will be the prepayment penalty if repaid in 15-years?

Initial friction costs : A loan worth $ 3 mi is secured with 3% in initial friction costs (points and closing costs).

User Account

All Pages