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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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5/
Solution: finance data bank