What is the IRR for each of these projects

Assignment Help Financial Accounting

Reference no: EM132840324

Questions -

Q1) Light Sweet Petroleum, Inc, is trying to evaluate a generation project with the following cash flows:

Year	Cash Flow
0	-$45,000,000
1	71,000,000
2	-15,000,000

Which of these values is/are the IRR(s) of the project (22.26%, 32.65%, 46.89%, 52.66% -31.67%, -74.87%)?

If the company requires a return of 12 percent on its investments, should it accept this project? Why?

Q2) Your firm has estimated the following cash flows for two mutually exclusive capital investment projects. The firm's required rate of return is 10%. The firm uses 3 years as the cut-off for payback period method.

Year	Project A Cash Flow	Project B Cash Flow
0	-$185,000	-$410,000
1	55,000	120,000
2	55,000	120,000
3	55,000	110,000
4	45,000	110,000
5	45,000	90,000
6	45,000	60,000

What is the Payback Period of Projects A and B?

Which project would you accept on the basis of payback period?

What is the NPV of projects A and B?

Which project would you accept on the basis of NPV?

What is the PI of projects A and B?

Which project would you accept on the basis of PI?

What is the IRR of projects A and B?

Which project would you accept on the basis of IRR?

Is there a conflict between the methods?

Which project(s) would you accept and why?

What would be your answer to 10 above if the projects were independent?

Q3) Lopez Industries has identified the following two mutually exclusive capital investment projects:

Year	Project A	Project B
0	-16000	-15500
1	400	12500
2	800	8000
3	13000	800
4	14000	800

What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct?

If the required return is 11%, what is the NPV for each of these projects? Which project should the firm accept if they apply the NPV rule?

Reference no: EM132840324

Questions Cloud

Find the compensation expense : The shares' fair value is $18 per share on December 31, 2021 and $20 per share on December 31, 2022. Find the compensation expense for 2022

Examples of e-business principles and concepts : Find at least three examples of e-business principles and concepts that apply to the website, then explain which principles the examples illustrate

Develop activities scaffolds learning and development : Assessment 3 Scenario Rohan (3.4) runs in dressed as a clown. He has been to the circus over the weekend and is very excited.

Describe canada socio-economy : Describe Canada's socio-economy in terms of the Boulding Triangle, including each of the three segments of the macro-environment.

What is the IRR for each of these projects : What is the IRR for each of these projects? If you apply the IRR decision rule, which project should the company accept? Is this decision necessarily correct

Develop and approve the student code of conduct : How does a school ensure that students are knowledgeable of the Code of Conduct?

What is data warehouse : What is data warehouse? How to connect data warehouse with the data-information-business intelligence process? Discuss with an example.

Implications for businesses of cultural-regulatory diversity : What is the implications for businesses of the cultural and regulatory diversity in international markets?

Discuss the possible alternatives to ethnocentric approach : Discuss the possible alternatives to the "ethnocentric approach" to HRM and state which approach you would recommend to be adopted in the new global HRM policy.

User Account

All Pages