Capital budgeting criteria

Assignment Help Financial Management
Reference no: EM13727163

Capital Budgeting Criteria

A company has a 12% WACC and is considering two mutually exclusive investment (that cannot be repeated) with the following cas flows:

0 1 2 3 4 5 6 7

Project A -$300 -$387 -$193 -$100 $600 $600 $850 -$180  

Project B -$405 -$134 $134 $134 $134 $134 $134 $0

A. What is each project's NPV ?

B. What is each project's IRR ?

Reference no: EM13727163

Questions Cloud

What is the break-even cost per kilowatt-hour : Compact fluorescent lamps (CFLs) have become more popular in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $0.47 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs ..
Accounts receivable as shown on the balance sheet : Rocket City Space Camp has annual credit sales of $16 million. The average collection period is 35 days. What is the average investment in accounts receivable as shown on the balance sheet? A. $646,000 B. $824,000 C. $1,408,888 D. $1,534,247 E. $1,69..
What is the risk-neutral probability : Consider a three-period ( t = 0,1, 2, 3 ) binomial option pricing model. There are 3-period put options on the stock. The values of the underlying variables are S = $50, n = 3, K = $48, u =1.1, d = 0.9, r =1.02 (a) what is the risk-neutral probabilit..
Annual pretax cost savings : Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $540,000 is estimated to result in $225,000 in annual pretax cost savings. The press falls in the MACRS five-year class, ..
Capital budgeting criteria : A company has a 12% WACC and is considering two mutually exclusive investment (that cannot be repeated) with the following cas flows: What is each project's NPV ? What is each project's IRR ?
Discount rate should you use to evaluate warehouse project : As a consultant to GBH skiwear, you have been ask to compute the appropriate discount rate to use in the evaluation of the purchase of a new warehouse facility. What discount rate should you use to evaluate the warehouse project?
What is the after tax cost of capital to walgreen for bonds : The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. The firm can sell new $1000 par value bonds with a 15 year maturity at a price of $951 that carries a coupon interest rate of 13.8 percent that ..
Firms cost of preferred stock financing : The preferred stock of Gator Industries sells for $35.55 and pays $2.74 per year in dividends. What is the cost of preferred stock financing? If Gator were to issue 529,000 more preferred shares just like the ones it currently has outstanding, it cou..
Individual component costs of capital : Compute the cost of capital for the firm for the following-A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.9%. Interest payments are $54.50. The bonds have a current market value of $1,120 and will mature ..

Reviews

Write a Review

Financial Management Questions & Answers

  Yield that trevor would earn by selling the bonds today

Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $936.05. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,048.77, what is the yield that Trevor would earn by sell..

  Discuss interest rate swaps and stock options describe the

1 explain interest rate swaps and stock options.2 explain the role that credit default swaps played in the financial

  Invested funds problem

Your uncle has $1,025,000 and wants to retire. He expects to live for another 25 years, and he also expects to earn 7.5% on his invested funds. How much could he withdraw at the beginning of each of the next 25 years and end up with zero in the accou..

  Explain what is the firm''s cost of common equity

the dividends are growing at 5%, flotation costs are $2 per share and the firm will net $72 per share upon the sale of the stock. What is the firm's cost of common equity?

  What is the yield to maturity of this bond

Dan is going to buy a 19 year bond that pays a coupon rate of 11.56% per year, and has a $1K par value. The bond currently priced $1,326.92? What is the yield to maturity of this bond? Assume annual coupon payments.

  How to prepare a monthly schedule of cash receipts

Seventy percent of Ellis' sales are on credit with 60 percent of receivables collected in the month after the sale and the rest of receivables collected in the second month after the sale.

  calculated using the lump sum PV or FV formula

Twenty years ago, a relative bought you a zero bond that matured at $1000 today. Zeroes pay no periodic interest and is calculated using the lump sum PV or FV formula. The stated interest rate during the 20-year period was 2.32% and inflation average..

  Calculate the npv and eac for each machine.

Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $3,132,000 and will last for six years. Variable costs are 35 percent of sales, and fixed costs are $270,000 per year.

  Debt market-equity market and money market-capital market

Please list the difference, advantage and disadvantage between "Debt market V.S Equity market" ; Money market V.S Capital Market ;

  Create different models in different areas

Regarding the auto industry, do you see vehicles being standard across the globe so manufacturers don't need to create different models in different areas? Chances are that in 20 years driverless cars will be common if not prevalent so this industry ..

  What is the stock price for each company

Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $3.30 next year. The growth rate in dividends for all three companies is 5 percent. The required return for each company’s stock is 7 percent, 10 percent, and 13 percent, respectiv..

  1 gomez electronics needs to arrange financing for its

1. gomez electronics needs to arrange financing for its expansion program. bank a offers to lend gomez the required

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