Finance problems on cash flow and discount rate

Assignment Help Finance Basics

Reference no: EM1362142

Project A Project B
Initial Investment 100,000 100,000
Year 1 40,000 10,000
Year 2 40,000 10,000
Year 3 40,000 75,000
Year 4 40,000 85,000

1. If the discount rate is 7%, which of the following is true:

a. The firm should accept only project A
b. The firm should accept only project B
c. The firm should accept both projects A and B
d. The firm should accept neither project A or B

2. If the discount rate is 10% and the projects are mutually exclusive, which of the following is true:

a. The firm should accept only project A
b. The firm should accept only project B
c. The firm should accept both projects A and B
d. The firm should accept neither project A or B

3. At what25. rate of interest is the present value of Project A equal to (within $100) the present value of Project B?

a. 20%
b. 0%
c. 15%
d. None of these.

4.If the discount rate is 25% and the projects are not mutually exclusive, which of the following is true:

a. The firm should accept only project A
b. The firm should accept only project B
c. The firm should accept both projects A and B
d. The firm should accept neither project.

5.What effect would depreciation have on the projects selection criteria:

a.Since the initial investment is equal for the two projects, Depreciation tax shields would add equally to both projects, ensuring no change in project acceptance criteria at all interest rates.
b.At lower interest rates, the effect of depreciation will tend to favor project A over project B.
c.If the projects are mutually exclusive, the computation of depreciation tax shields will have no effect on selection, regardless of the size of the initial investment.
d.None of these is true.

Reference no: EM1362142

Questions Cloud

What would landowner have an incentive to control erosion : If the farmer rented her land from a landowner,would she have the same incentives to control soil erosion. What would the landowner have an incentive to control erosion.

Positive affect on community health : Identify public health factors such as personal characteristics, genetics, and lifestyle issues that can affect the whole community. Name advocates, stakeholders and others that can have a positive affect on community health.

Event planning organizations : Event Planning Organizations - Explain what are different types of event planning organizations

Explain what is the impact of divergent corporate culture : Explain What is the impact of divergent Corporate Culture during a merger and What is the impact of powerful leaders on corporations?

Finance problems on cash flow and discount rate : If the discount rate is 10 percent and the projects are mutually exclusive, which of the following is true, If the discount rate is 7%, which of the following is true:

Elucidate the return to deficit spending century : Elucidate the return to deficit spending since the turn of the century. Consider the causes of the deficits and surpluses and provide your own insight.

What volume should the balloon have after being inflated : what volume should the balloon have after being inflated. Billiard ball A of mass mA=0.400kg moving with speed vA=1.80m/s strikes ball B, initially at rest of mass mB=0.500kg. As a result of collision, ball A is deflected off at an angle of 30.0 deg..

Hermanns whole brain concept : Hermann's whole brain concept - Do you believe understanding your preferences according to the whole brain model can help you be a better leader?

Write application that allows users to enter student id : Write an application that enables users to enter student ID and three exam scores. Provide a method to compute and return the overall exam average.

User Account

All Pages