1) Consider projects A and B: Cash Flows (dollars) Project C0 C1 C2 NPV at 10% A -34,500 24,600 24,600 + $8,194 B -54,500 37,500 37,500 + 10,583 a. Calculate IRRs for A and B. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Project IRR A % B % b. Which project does the IRR rule suggest is best? Project A Project B c. Which project is really best? Project A Project B
2)Consider projects A and B with the following cash flows:
|
C0 |
|
C1 |
|
C2 |
|
C3 |
|
| A |
|
- |
$ |
33 |
|
+ |
$ |
17 |
|
+ |
$ |
17 |
|
+ |
$ |
17 |
|
| B |
|
- |
|
58 |
|
+ |
|
33 |
|
+ |
|
33 |
|
+ |
|
33 |
a-1. What is the NPV of each project if the discount rate is 10%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
a-2. Which project has the higher NPV?
b-1. What is the profitability index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b-2. Which project has the higher profitability index?
c-1. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects?
c-2. Which project is most attractive to a firm that is limited in the funds it can raise?