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Kerron Company is presented with the following two mutually exclusive projects. The required return for both projects is 17 percent. Year Project M Project N 0 –$145,000 –$360,000 1 64,000 150,000 2 82,000 185,000 3 73,000 135,000 4 59,000 115,000 Required: (a) What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) IRR Project M % Project N % (b) What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) NPV Project M $ Project N $ (c) Which, if either, of the projects should the company accept
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $320,000. The truck falls into the MACRS 10-year class, and it will be sold after 10 years for $57,000. The firm's marginal t..
A defined benefit pension plan has expected payouts of $15 million per year for eight years and then $20 million per year over the following 15 years. Actuaries have estimated that the fund can be expected to earn an average of 5.25 percent on its as..
ELO manufacturing is looking to hire a new plant supervisor. They have 2 qualified candidates, Charlie, 43 and Kevin, 36. Both would have a starting salary of $62,000. Each could expect a 3% cost of living raise each year.
Assume both portfolios A and B are well diversified, that E(rA) = 13.6% and E(rB) = 14.4%. If the economy has only one risk factor, and βA = 1 while βB = 1.1, what must be the risk-free rate?
You currently owe $18,000 on a home mortgage loan at 9.5 percent interest. If you make monthly payments of $576.59 per month, how long will it take you to fully repay the loan?
Consider a project with an initial outlay of $1,000 and yearly cash flows as follows: -200, -100, 300, 300, 300, 100, 100, 200, 700, 400, and 100. Calculate the classical payback period assuming 10% cost of funds.
Purple Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.67 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be..
As you increase (decrease) the length of time involved, what happens to the present value of an annuity? Explain why. What happens to the future value of an annuity if you increase (decrease) the interest rate? Explain why. What does continuous compo..
What are the primary strengths and weaknesses of the payback approach in capital budgeting? What are the primary objectives of the investment project postaudit review?
When you do your research on mutual fund performance, you need to consider the fact that only unsuccessful investment strategies are made public. What is the effect of this fact on your research about the mutual fund performance? (I.e., will the perf..
Reducing country risk. MNCs such as Alcoa, DuPont, Heinz and IBM donated products and technology to foreign countries where they had subsidiaries. How could these actions have reduced some forms of country risk?
Has the inflation rate in the US increased or decreased in the past 5 years? Why? Have interest rates increased or decreased over that same period? Why? What can we likely expect of both in the near future?
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