Required projects with the cash flows

Assignment Help Financial Management
Reference no: EM131583473

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 8 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time: 0 1 2 3 Project A Cash Flow -30,000 20,000 40,000 11,000 Project B Cash Flow -40,000 20,000 30,000 60,000 Use the PI decision rule to evaluate these projects; which one(s) should be accepted or rejected?

accept neither A nor B, accept both A and B, reject A, accept B, accept A, reject B.

Reference no: EM131583473

Questions Cloud

Real risk-free rate : You read in The Wall Street Journal that 30-day T-bills are currently yielding 4.9%. Your brother-in-law, a broker at Safe and Sound Securities,
Compute dividends over the next five years : Compute the dividends over the next five years.
Values for a baii plus financial calculator : You expect to earn 12% annually on the account. How many years will it take to reach your goal?
Calculating annuity future values-make annual deposits : You are planning to make annual deposits of $3,960 into a retirement account that pays 8 percent interest compounded monthly.
Required projects with the cash flows : Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below.
Company financial and operating performance in fiscal years : What is your assessment of Walt Disney Company’s financial and operating performance in fiscal years 2010–2013
Considering investing in project with cash flows shown : Suppose your firm is considering investing in a project with the cash flows shown below,
Hanging original investment to dollar gain or loss : "The best measure to use when comparing alternative investments is the amount of original investment.", hanging "original investment" to "dollar gain or loss.
About earning power of the firm current and future assets : Today’s stock price reflects investor expectations about the earning power of the firm’s current and future assets.

Reviews

Write a Review

Financial Management Questions & Answers

  Coupon rate should bonds have in order to sell at par value

What coupon rate should the bonds have in order to sell at par value?

  How technology is changing the customer service

Write a 500-750-word paper that identifies the major characteristics of services compared with goods, and describe how technology is changing the customer service and service offerings.

  Balances in their liability and equity accounts

Suppose next year the Andrews Company generates $36,500,000 in Net Profit, pays $15,000,000 in dividends and total liabilities and common stock remain unchanged

  How long would it take you pay off the balance on new card

How many months will it take to pay off the debt if you only make the $200 minimum payment each month? All is not lost, because you just received an offer to transfer your $10,000 balance from your current credit card to a new credit card charging a ..

  Funds rate of return to calvins investment situation

Assume Calvin invests in a mutual fund that earns about 10% annually from dividend income and capital gains. Given that Calvin wants to receive $1,000 to $1,500 a month from his mutual fund, what would be the size of his investment account 5 years fr..

  Required rate of return on a stock with beta

Assume that the risk-free rate is 6% and that the market risk premium is 8%. What is the required rate of return on a stock with a beta of 1.3?

  What is their break-even level of operating income

Home Depot, Inc. (HD) had 1.70 billion shares of common stock outstanding in 2008, wheras Lowes Companies, Inc. (LOW) had 1.46 billion shares outstanding. Assuming Home Depot's 2008 interest expense is $696 million, Lowes' interest expense is $239 mi..

  Shares of stock outstanding and no debt

Omega Corp. currently has 200,000 shares of stock outstanding and no debt. What will their Net Income be if they issue $1,000,000 in debt?

  What is the present value of the futures contract in dollars

A Treasury bond futures contract settles at 95'8. Show calculations. What is the present value of the futures contract in dollars?

  What is incremental cost of borrowing the additional funds

A borrower can obtain an 80 percent loan at a 4.25% rate with monthly payments amortized over 30 years. Alternatively, he could obtain a 90 percent loan at a 5.75% rate with the same loan term but one point is charged on the 90% loan. the borrower pl..

  Project expected dollar-denominated cash flows consist

International Machinery Company (IMC) is a Swedish multinational manufacturing company. Currently, IMC's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consis..

  What is the firm pretax cost of debt

GIMP Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 2 years to maturity that is quoted at 105 percent of face value. The issue makes annual payments and has an embedded cost (coupon rate) of 9.8 percent annu..

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