Get a demand for additional funds to be posted

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Reference no: EM131896809

1. Capital budgeting criteria: mutually exclusive projects

Project S costs $11,000 and its expected cash flows would be $7,000 per year for 5 years. Mutually exclusive Project L costs $33,500 and its expected cash flows would be $10,900 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend?

I. Both Projects S and L, since both projects have IRR's > 0.

II. Project S, since the NPVS > NPVL.

III. Project L, since the NPVL > NPVS.

IV. Both Projects S and L, since both projects have NPV's > 0.

V. Neither S or L, since each project's NPV < 0.

2. Yesterday, you entered into a futures contract to sell €62,500 at $1.50 per €. Your initial performance bond is $1,500 and your maintenance level is $500. At what settle price will you get a demand for additional funds to be posted?

a. $1.4840 per €.

b. $1.5160 per €.

c. $1.1920 per €.

d. $1.1840 per €.

Reference no: EM131896809

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