Ranked higher under the npv criterion of cost of capital

Assignment Help Financial Management
Reference no: EM131327197

When two mutually exclusive projects are being compared, explain why the short term project might be ranked higher under the NPV criterion of the cost of capital is low. Would changes in the cost of capital ever cause a change in the IRR ranking of two such projects? Why or why not?

Reference no: EM131327197

Questions Cloud

Determine different career paths that are available for you : Using each of the following tools, determine different career paths that are available for you based on your degree. Save your results and take notes!
What group cohesion strategies will you apply in future team : What group cohesion strategies will you apply in future team work? Describe these strategies and how they strengthen group work. What is your own decision-making style? Describe this style and how you will apply it to future group work
Determining the size of the beta of the shares : Which one of the following risks is relevant in determining the size of the beta of the shares of EA? Games, the popular computer gaming? manufacturer? EA Games makes titles such as Madden NFL? Football, Fight? Night, Burnout, and Need for Speed. Seg..
Differences between the cost and sales comparison approaches : Why is the income approach to value often difficult to use on a single-family residential appraisal?- What are the differences between the cost and sales comparison approaches to appraising property?
Ranked higher under the npv criterion of cost of capital : When two mutually exclusive projects are being compared, explain why the short term project might be ranked higher under the NPV criterion of the cost of capital is low. Would changes in the cost of capital ever cause a change in the IRR ranking of t..
List four important drivers of housing demand : List four important drivers of housing demand and price appreciation.- What are public goods? How may they be reflected in house prices?
Incremental return on new average investment be : Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $200,000 if credit is extended to these new customers. Of the new accounts receivable generated, 5 percent will prov..
What if your expected period of ownership was to change : What if your expected period of ownership was to change to five years. Would owning or renting be better if you wanted to earn a 10% IRR after taxes?
What is annualized return : Assume you buy a share of stock at $29, it pays $1.97 in dividends, and you sell it 237 days later for $22. What is your annualized return? Enter a negative percentage for a loss and assume a 365-day year.

Reviews

Write a Review

Financial Management Questions & Answers

  Spending on three different development projects

A company has $1,000,000 available for spending on three different development projects. The company has projected that it needs to make 10% on the $1,000,000 over the next year to meet its next year’s budget. The company’s management decides to inve..

  Two mutually exclusive projects offer the cash flows

Two mutually exclusive projects offer the following cash flows at year 0 and 1, Project X: -240 (year 0) and 580 (year 1), Project Y: -10,060 (year 0) and 11,010 (year 1). Calculate an incremental IRR of doing project Y and on that basis decide which..

  Briefly describe the basic components of the cash budget

Which three statements result as part of the short-term (operating) financial planning process? What is the purpose of the cash budget? What role does the sales forecast play in its preparation? Briefly describe the basic components of the cash budge..

  Forward rate for one us dollar in terms of canadian dollars

If the spot rate for Candian dollars is 1.25 = 1 USD and the annual interest rate on fixed rate one year depostis of Canadian dollars is 2.5% and for US$ is 1.5%, what is the 9 month forward rate for one US dollar in terms of Canadian dollars? Is thi..

  Dividends are expected to grow at a constant rate

The stock’s current dividend is $1.00, and dividends are expected to grow at a constant rate of 3.5% per year. The intrinsic value of a stock should equal the sum of the present value of all of the dividends that a stock is supposed to pay in the fut..

  What is the gain-loss per contract on the position

Suppose you purchase a call contract on a T-bond with an exercise price of 102 16/32 . The bond represents $100,000 of bond principal, and has a premium of $1,000. If the actual T-bond price falls to 100, what is the gain/loss per contract on the pos..

  Response to widespread outcry about pricing of generic drugs

In mid-September, 2015 S&P 500 lowered the credit rating of We$ellDrugs, Inc (W$D) from AAA to AA in response to widespread outcry about the pricing of generic drugs that were recently purchased by the company. How would the yield to maturity of the ..

  Convert pounds to dollar sat an exchange rate

Grant Inc., is a well known U.S firm that needs to borrow 10 million British pounds to support a new business in the United Kingdom. However, it cannot obtain financing from te British banks beacuse it is not yet established within the United Kingdom..

  What is the present value of an annuity

What is the present value of an annuity of $7,300 per year, with the first cash flow received three years from today and the last one received 25 years from today? Use a discount rate of 6 percent.

  Future interest in property is generally nondeductible

A gift of a partial or future interest in property is generally nondeductible. However, there are specific exceptions. A current deduction is available for all the following contributions to a qualified organization EXCEPT:

  What is the future worth of polisher

Final Finishing is considering 3 mutually exclusive alternatives for a new polisher. Each alternative has an expected life of 13 years and no salvage value. Polisher 1 requires an initial investment of $23,000 and provides annual benefits of $4,360. ..

  What size annuity will result in a lump sum equal

You wish to purchase a home in five years from now and estimates that an initial down payment of $20,000 will be required at that time; and you wish to make equal annual end-of year deposits in an account paying annual interest of 6 percent, so what ..

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