What is the underlying cause of ranking conflicts

Assignment Help Finance Basics
Reference no: EM132354482

Dear Tutors,

Could you help me out this?

Carolina Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and are not repeatable. 

WACC: 7.75%  

Year    0      1     2    3   4

CFS -$1,050(YEAR 0)  $675(YEAR 1) $650(YEAR 2)

CFL -$1,050(YEAR 0)  $360(YEAR 1) $360(YEAR 2) $360(YEAR 3) $360(YEAR 4)

a) If the decision is made by choosing the project with the higher IRR, how much value will be forgone?

b) What is the underlying cause of ranking conflicts between NPV and IRR?

Reference no: EM132354482

Questions Cloud

Future value of all expected profits : If the Present Value of all estimated futures costs of a 4 year new investment project is 960, and the future value of all expected profits is 1,750
Present value of the bond today : If the current interest rate demanded by the market is 0.15, what is the present value of the bond today? The bond has a par value of $1,000
What is vogt required rate of return : The U.S. government T-Bill is expected to yield 0.05, and the S&P 500 is expected to yield 0.13 in the near future. What is Vogt's required rate of return?
Fixed costs and production volume : Linaweaver Inc. has $3.10 per unit in variable costs and $4.60 per unit in fixed costs and a production volume of 100,000 units per year.
What is the underlying cause of ranking conflicts : Carolina Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and are not repeatable
Explain the concepts personal problem and social problem : Define and explain the concepts "personal problem" and "social problem." Explain how the social problems framework can be applied to the obesity epidemic.
Explain how you determined the most important topic : Critical Response Essay - Explain your critical response to the topic in the library essay you selected (place, community, communication/speaking out)
Standard deviation of the portfolio : Which of the following would be true for a stock with a negative beta if you found one?
Calculate the monthly payment and ending balance : How do I calculate the monthly payment and Ending Balance for a loan if the Original Balance is $93,000

Reviews

Write a Review

Finance Basics Questions & Answers

  Difference between the operating cycle and cash cycle

In one hundred words or more please describe to me the difference between the operating cycle and cash cycle?

  Calculate cost of goods sold

At the beginning of 2012, Bryers Incorporated reports inventory of $7,000. During 2012, the company purchases additional inventory for $22,000.

  What is the market price of this stock if the market rate

What is the market price of this stock if the market rate of return is 15%?

  Description of present value of money

Ambrin Corp. expects to receive $2,000 per year for 10 years and $3,500 per year for next ten years. What is the present value of this 20 year cash flow. Employ a 11% discount rate.

  Which two areas of business generally attract the most small

Which two areas of business generally attract the most small businesses? Why are these areas attractive to small business?

  What is the expected yield to maturity

A 20-year U.S. Treasury bond with a par value of $1,000 is currently selling for $1,025 from various securities dealers. The bond carries a 6 percent coupon rate with payments made annually. If purchased today and held to maturity, what is the exp..

  Provided regarding the forming department

Forming and Finishing. The following information is provided regarding the Forming department.

  Ignore the discounting of cash flows in this part

Using the financial statement effects template, show the financial statement effects, if any, that Firm D would have on October 31, 2010, when it acquires the forward commodity price contract. Show the financial statement effects of recording the cha..

  What is the bond market

"What is the Bond Market and what are key differences from the Stock Market?"

  Construct a pro forma income statement

In year 2, Price per unit increases to $13.50, and unit of sales increases by 4%, all other assumptions remain the same.

  Coverage ratios sectors inc has an ebit of 7221643 and

which one of the following statements about trend analysis is not correct?coverage ratios sectors inc. has an ebit of

  How share prices should respond to management decisions

You just heard one of your colleagues saying that NPV=0 means that the project makes no profit no loss? Do you agree with your friend? Explain.

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