1.A company is analyzing two mutually exclusive projects, E and F, whose cash flows are shown...

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Finance

1.A company is analyzing two mutually exclusive projects, E andF, whose cash flows are shown below:
Years 0 1 2 3 4
Cash Flow E -$1,100 $900 $350 $50 $10
Cash Flow F -$1,100 $0 $300 $400 $850

The company's cost of capital is 12 percent, and it can get anunlimited amount of capital at that cost. What is the regular IRR(not MIRR) of the better project? (Hint: Note that the betterproject may or may not be the one with the higher IRR.)
12.53%
17.46%
13.88%
13.09%
2.Compute the IRR for Project X and note whether the firm shouldaccept or reject the project with the cash flows shown below if theappropriate cost of capital is 10%.
Time: 0 1 2 3 4 5
Cash Flow: -1300 400 400 400 400 400
16.32%; accept
16.32%; reject
13.44%; accept
13.26%; reject
3. Compute the NPV for Project X and accept or reject theproject with the cash flows shown below if the appropriate cost ofcapital is 9 percent.
Year 0 1 2 3 4 5
Cash Flow -$1000 -$75 $100 $100 $0 $2000
$-639.96
$360.04
$392.44
$486.29

Answer & Explanation Solved by verified expert

3.6 Ratings (501 Votes)

1Project E Internal rate of return is calculated using a financial calculator by inputting the below Press the CF button CF0 1100 It is entered with a negative sign since it is a cash outflow Cash flow for each year should be entered Press Enter and down arrow after inputting each cash flow After entering the last cash flow cash flow press the IRR and CPT button to get the IRR of the project The IRR of See Answer

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Transcribed Image Text

1.A company is analyzing two mutually exclusive projects, E andF, whose cash flows are shown below:Years01234Cash Flow E-$1,100$900$350$50$10Cash Flow F-$1,100$0$300$400$850The company's cost of capital is 12 percent, and it can get anunlimited amount of capital at that cost. What is the regular IRR(not MIRR) of the better project? (Hint: Note that the betterproject may or may not be the one with the higher IRR.)12.53%17.46%13.88%13.09%2.Compute the IRR for Project X and note whether the firm shouldaccept or reject the project with the cash flows shown below if theappropriate cost of capital is 10%.Time:012345Cash Flow:-130040040040040040016.32%; accept16.32%; reject13.44%; accept13.26%; reject3. Compute the NPV for Project X and accept or reject theproject with the cash flows shown below if the appropriate cost ofcapital is 9 percent.Year012345Cash Flow-$1000-$75$100$100$0$2000$-639.96$360.04$392.44$486.29

Years	0	1	2	3	4
Cash Flow E	-$1,100	$900	$350	$50	$10
Cash Flow F	-$1,100	$0	$300	$400	$850