Npv of the higher npv project

Assignment Help Finance Basics
Reference no: EM131055643

Pansy Pants Co., a supplier of denim jeans, uses a cost of capital of 13 percent to evaluate average-risk projects, and it adds or subtracts 2 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Both have a cost of $ 350 and will last 4 years. Project A, a riskier-than-average project, will produce annual end of year cash flows of $ 90 . Project B, of less than average risk, will produce cash flows of $225 at the end of Years 3 and 4 only. List the NPV of the higher NPV project.

Reference no: EM131055643

Questions Cloud

Beta and required rate of return stock : Beta and required rate of return A stock has a required return of 16%; the risk-free rate is 5.5%; and the market risk premium is 3%. What is the stock's beta? New stock's required rate of return will be  %.
Cause analysis on a significant public health problem : B. Create a logic model (inputs, processes, outputs, outcomes) for solving the selected problem. Provide a 100-150 word summary explaining the logic model.
What is the family credit score : Mr. Childress has a $35,000 life insurance policy with a cash surrender value of $1,100.Suppose the lender uses the credit scoring system presented with this chapter and denies all application scoring fewer than 360 points. Is the Childress family..
Required return-what is the current share price : Terminal Emulator Co. pays a constant $11.66 dividend on its stock. The company will maintain this dividend for the next 11 years and will then cease paying dividends forever. If the required return on this stock is 14 percent, what is the current sh..
Npv of the higher npv project : Project A, a riskier-than-average project, will produce annual end of year cash flows of $ 90 . Project B, of less than average risk, will produce cash flows of $225 at the end of Years 3 and 4 only. List the NPV of the higher NPV project.
Research paper on your improvement project : FINAL: You have been working on your Improvement Project for the past few weeks. For your final work on this project, you will now put the pieces together by incorporating your research along with a report on the changes you made and the outcome o..
What is the yield on nine-year treasury note : The real risk-free rate is 1.5 percent. Inflation is expected to be 3.5 percent this year, 4 percent next year, and 5 percent thereafter. The maturity risk premium is estimated to be 0.08 ´ (t - 1)%, where t is the number of years to maturity. What i..
What happened as a result of the buffalo stamped : During Haun's westward journey what happened as a result of the buffalo stamped?
Assume that the maturity risk premium is zero : The real risk-free rate is 3.5 percent, and inflation is expected to be 3 percent next year and 5 percent for the following 3 years. Assume that the maturity risk premium is zero. What is the yield on 3-year Treasury securities?

Reviews

Write a Review

Finance Basics Questions & Answers

  What should be the hedge ratio?

What should be the hedge ratio?

  What is the eps figure for 2008

Pizza A had earnings after taxes of $600,000 in the year 2008, and 300,000 shares outstanding. In year 2009, earnings after taxes increased to $750,000, and 25,000 new shares were issued for a total of 325,000 shares. What is the EPS figure for 20..

  Prepare the necessary adjusting entries at december 31 for

Prepare the necessary adjusting entries at December 31 for each of the above items. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

  What are the basic assumptions in applying the pe ratio of

what are the basic assumptions in applying the pe ratio of one company to the earnings of another

  It also knows that the company has days sales in inventory

wolfgangs masonry management estimates that it takes the company 27 days on average to pay off its suppliers. it also

  Capital structure weights on a book value basis

Erna Corp. has 4 million shares of common stock outstanding. The current share price is $83, and the book value per share is $8. Erna Corp. also has two bond issues outstanding. The first bond issue has a face value of $90 million, has a coupon of 6 ..

  What are the after-tax cash flows for the company

Assume a corporation has earnings before depreciation and taxes of $82,000, depreciation of $45,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company.

  Determine the betas of the two stocks

Use the information in the following table to determine the betas of the two stocks.

  What factors are used to compute the value of a bond

What factors are used to compute the value of a bond? Indicate how much each factor contributes to the calculated value. 2. How is the value of a typical corporate bond determined? Which formulas are used to determine the value? 3. Why would a bond's..

  A not-for profit nursing home has total expenses of 20

a hospital has contracted with an hmo to provide acute care inpatient services for 1000 per day subject to a 10 percent

  Forecasting conclusions that support tfc’s decision

From the scenario, cite your forecasting conclusions that support TFC’s decision to expand to the West Coast market. Speculate as to whether or not the agency conflict discussed in the scenario could become a roadblock to your conclusions.

  Wealth management question

If market interest rates are currently 15 percent and your investment provides you this 15 percent return, does that imply that you are 15% more wealthy.

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