How much value will be forgone

Assignment Help Financial Management
Reference no: EM131012322

Poston Inc. is considering Projects S and L whose cash flows are shown below. These projects are mutually exclusive (must choose one or the other) equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR, how much value will be forgone? You must calculate the IRR and NPV for both projects select the project with the higher ITT and then calculate how much less the NPV is by selecting the project with the highr IRR.

WACC: 10.25%

year 0 1 2 3 4

CFs -$2050 $750 $760 $770 $780

CF L -$4300 $$1500 $1518 $1536 $1554

Reference no: EM131012322

Questions Cloud

What you learned about the continuum of exceptionalities : Given what you have learned about the continuum of exceptionalities, what recommendations would you make? Provide reasons to support your answer
Conduct preliminary searches before finalising the choice : Conduct some preliminary searches before finalising the choice of company-make sure that there are enough secondary data available on the company
Calculate the value of cash and marketable securities : Mandesa, Inc., has current liabilities of $8 million, current ratio of 2 times, inventory turnover of 12 times, average collection period of 30 days, and credit sales of $64 million. Calculate the value of cash and marketable securities.
Research the role of the public health department : What factors do you think you control that will help you have a higher quality of health?
How much value will be forgone : Poston Inc. is considering Projects S and L whose cash flows are shown below. These projects are mutually exclusive (must choose one or the other) equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR,..
Find dimensions of channel for least expenditure of energy : A trapezoidal channel having side slopes of 2 horizontal and 1 vertical discharges 14.35 m3/s of water at a velocity of 1.0m/s. The channel lining has a roughness coefficient, n = 0.013. Find the dimensions of the channel for the least expenditure..
What is your annual payment to big attitude : You are borrowing money to buy your first house that costs $350,000. You go to the first bank you see, Big Attitude Bank, and they are charging 4.25% interest. What is your annual payment to Big Attitude? What is your annual payment to Super Cheap Ba..
How many edges does an n-cube have : How many edges does an n-cube have? Give your reason. How many (main) diagonals does a 4-dim cube have? Are any two of them perpendicular to each other?
Firm reduced its net working capital investment : The 2014 balance sheet of Sugarpova's Tennis Shop, Inc., showed long-term debt of $5.5 million, and the 2015 balance sheet showed long-term debt of $5.7 million. The 2015 income statement showed an interest expense of $180,000. Suppose you also know ..

Reviews

Write a Review

Financial Management Questions & Answers

  Offered an investment opportunity

You are offered an investment opportunity: pay $1000 a year for ten years then you will receive $2000 a year for 20 years.” If you require 8% return on our investment, would you accept this investment opportunity?

  Combined federal plus state tax bracket

An investor is in a 35% combined federal plus state tax bracket. If corporate bonds offer 9.25% yields, what must municipals offer for the investor to prefer them to corporate bonds?

  Net income-total asset turnover-equity multiplier

You are considering investing in Dakota’s Security Services. You have been able to locate the following information on the firm: Total assets are $32.5 million, accounts receivable are $4.45 million, ACP is 25 days, net income is $4.00 million, and d..

  Assume that an individual makes a down payment

The price of a new car is $40,000. Assume that an individual makes a down payment of 25% toward the purchase of the car and secures financing for the balance at the rate of 9%/year compounded monthly. What monthly payment will she be required to make..

  What is her after-tax yield on the bonds

Karen Smith is in the 35% personal tax bracket. She is considering investing in HCA (tax table) bonds that care a 10% interest rate. What is her after-tax yield (interest rate) on the bonds?

  Important in capital budgeting cash flow analysis

Net working capital investment is important in capital budgeting cash flow analysis because:

  Dgap analysis to determine interest rate risk

Use DGAP analysis to determine if there is interest rate risk in the following transaction: A bank obtains $ 25,000 in funds from a customer who makes a deposit with a five- year maturity that pays 5 percent annual interest compounded daily. All inte..

  Calculate the expected return and variance of return

Calculate the expected return and variance of return and calculate the expected return and variance of return for a portfolio where 20% of your wealth is invested in AA, 30% in BB, and 50% in CC.

  What is the pre-money valuation-post-money valuation

A potential investor is seeking to invest $500,000 in a venture, which currently has 1,000,000 shares held by its founders, and is targeting a 50% return five years from now. The venture is expected to produce half a million dollars in income per yea..

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Risk free rate is 6percentage and the market risk premium

Assume the risk free rate is 6percentage and the market risk premium is 6 percentages. The stock of physician care network is (PCN) has a beta of 1.5. The last dividend paid by PCN (D0) was $2 per share.

  What is the economic order quantity

Rock Bottom Carpets sells 5,600 carpets a year at an average price per carpet of $1,490. The carrying cost per unit is $22.37. The company orders 500 carpets at a time and has a fixed order cost of $69 per order. The carpets are sold out before they ..

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