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Question # 00004777 Posted By: spqr Updated on: 12/06/2013 04:05 AM Due on: 12/30/2013
Subject Finance Topic Finance Tutorials:
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74.Kosovski Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and are not repeatable. If the decision is made by choosing the project with the higher IRR, how much value will be forgone? Note that under some conditions choosing projects on the basis of the IRR will cause $0.00 value to be lost.

WACC:

8.25%

0

1

2

3

4

CFS -$1,050

$675

$650

CFL

-$1,050

$360

$360

$360

$360

75.Nast Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher MIRR rather than the one with the higher NPV, how much value will be forgone? Note that under some conditions choosing projects on the basis of the MIRR will cause $0.00 value to be lost.

WACC:

11.25%

0

1

2

3

4

CFS -$1,100

$375

$375

$375

$375

CFL

-$2,200

$725

$725

$725

$725

76.Yonan Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the shorter payback, some value may be forgone. How much value will be lost in this instance? Note that under some conditions choosing projects on the basis of the shorter payback will not cause value to be lost.

WACC:

10.25%

0

1

2

3

4

CFS

-$950

$500

$800

$0

$0

CFL

-$2,100

$400

$800

$800

$1,000

77.Noe Drilling Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO believes the IRR is the best selection criterion, while the CFO advocates the MIRR. If the decision is made by choosing the project with the higher IRR rather than the one with the higher MIRR, how much, if any, value will be forgone, i.e., what's the NPV of the chosen project versus the maximum possible NPV? Note that (1) "true value" is measured by NPV, and (2) under some conditions the choice of IRR vs. MIRR will have no effect on the value lost.

WACC:

8.00%

0

1

2

3

4

CFS

-$1,100

$550

$600

$100

$100

CFL

-$2,750

$725

$725

$800

$1,400

$130.43

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  1. Tutorial # 00004571 Posted By: spqr Posted on: 12/06/2013 04:16 AM
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    are shown below. These projects are mutually exclusive, equally risky, ...
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