Npv decision rule to evaluate projects

Assignment Help Finance Basics
Reference no: EM131890650

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 8 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and three years, respectively.

Project A cashflow -20000 10000 30000 1000

Project B cashflow -30000 10000 20000 50000

Calculate the NPV and use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected and why?

Reference no: EM131890650

Questions Cloud

What best describes a sunk cost : What best describes a sunk cost? If the world price is 13 cents per pound, what areas of the world supply sugar to the world market and the United States?
Discuss the pricing methodology by comparing : Convertible Bonds are normally priced based on Binomial Model; discuss the pricing methodology by comparing it to the pricing of Options.
Maximum cost the company would be willing to pay for project : What is the maximum cost the company would be willing to pay for this project?
What are techniques used to make forecasts about new media : Sony is promising to come out with a holographic television soon. It is like 3-D TV but with no glasses; it allows you to see a show or sporting event.
Npv decision rule to evaluate projects : Calculate the NPV and use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected and why?
What is the dollar amount of income : If London needs to have a total return of 0.23 during the year, then what is the dollar amount of income that she needed to have to reach her objective?
What is the cost of each of the capital components : What is the cost of each of the capital components? What is Adamson's WACC?
What do the customers buy-use : Who are the current customers/users? Include information related to demographics, psychographics and buying behavior, price sensitivity, customer satisfaction.
What is the company expected growth rate : Kahn Inc. has a target capital structure of 60% common equity and 40%. What is the company's expected growth rate?

Reviews

Write a Review

Finance Basics Questions & Answers

  Determine the amounts that the company should record

Italian Bread Company purchased land as a factory site for $60,000. An old building on the property was demolished, and construction began on a new building.

  Compute the nominal annual cost

Durkin Cement purchases on terms of 2/15, net 30 days. It does not take discounts and it typically pays 68 days after the invoice date. Net purchases value to $720,000 per year.

  What is the standard deviation of the returns on a stock

What is the standard deviation of the returns on a stock given the following information?

  What interest rate is the mortgage company charging you

A mortgage company offers to lend you $85,000; the loan calls for payments of $8,538.98 at the end of each year for 30 years. What interest rate is the mortgage company charging you? Round your answer to two decimal places.

  Do you think that eliminating or limiting the amount

Do you think that eliminating or limiting the amount of deposit insurance would be a good idea? Explain your answer.

  Create a profit-and-loss statement for a mcdonad franchise

Create a Profit-and-loss statement for a McDonad's franchise (sales revenues and expenses, either actual or estimated).

  At what interest rate would the company be indifferent

At what interest rate would the company be indifferent between the twoprojects?

  Create a cash flow statement with operating activities

Suppose you are CFO for your company and you have been given the task of financial planning for a new product to increase corporate earnings each share.

  How much should you be willing to pay for the bond

You are considering a 10-year, $1,000 par value bond. Its coupon rate is 9%, and interest is paid semiannually. If you require an "effective" annual interest rate (not a nominal rate) of 8.16%, then how much should you be willing to pay for the bo..

  Compute wal-mart and target''s degree of operating leverage

Using the most recent three years of available data, compute Wal-Mart's and Target's degree of operating leverage. You will have to use the formula, percentage change in pretax income divided by percentage change in revenues. Show your work

  What is the tie ratio

Times-interest-earned-ratio- The H.R. Pickett Corp. has $500,000 of debt outstanding, and it pays an annual interest rate of 10 percent. Its annual sales are $2 million, its average tax rate is 30 percent, and its net profit margin on sales is 5 perc..

  Good place to invest money

Make a list of three products and services that you buy on a weekly or monthly basis and the companies that sell them.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd