Problem - npv versus irr garage inc has identified the, Ask an Expert

Finance

Problem - NPV versus IRR

Garage, Inc., has identified the following two mutually exclusive projects:

Year	Cash Flow (A)	Cash Flow (B)
0	-$29,700	-$29,700
1	15,100	4,650
2	13,000	10,150
3	9,550	15,900
4	5,450	17,500

a-1. What is the IRR for each of these projects?

a-2. Using the IRR decision rule, which project should the company accept?

a-3. Is this decision necessarily correct?

b-1. If the required return is 12 percent, what is the NPV for each of these projects?

b-2. Which project will the company choose if it applies the NPV decision rule?

c. At what discount rate would the company be indifferent between these two projects?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M93136514

Have any Question?Write your Review or question?

Related Questions in Basic Finance

Let timco use a capital structure that is 35 debt and 65

Let Timco use a capital structure that is 35% debt and 65% equity, The firm can borrow at 6%. The tax rate is 40%. Let the firm beta be 1.9, the market return 14%, and the risk free rate 2%. Find the WACC.

Moody farms just paid a dividend of 265 on its stock the

Moody Farms just paid a dividend of $2.65 on its stock. The growth rate in dividends is expected to be a constant 3.8 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a r ...

Question - the hawaiian corporation expects this years net

Question - The Hawaiian Corporation expects this year's net income to be $12 million. The firm's target debt/assets ratio is 30 percent. This year, Hawaiian has $20 million profitable investment opportunities. According ...

Question - write answers to the following statements each

Question - Write answers to the following statements. Each answer should be approximately 225 words and should use 1-2 sources in addition to the textbook. Use real-life examples to support your reasoning. Demonstrate ho ...

Tank ltd is considering undertaking the purchase of a new

Tank Ltd is considering undertaking the purchase of a new piece of equipment that is expected to increase revenue by $12,000 each year for six years. The equipment will increase costs $4,000 each year for six years. It c ...

One of your clients wants a trust over which he can

One of your clients wants a trust over which he can exercise exclusive control over disposition of his assets to his children from a former marriage. Which of the following trusts apply? (1) bypass trust (2) power of app ...

Liquidity ratios burts tvs has current liabilities of 258

Liquidity Ratios Burt's TVs has current liabilities of $25.8 million. Cash makes up 48 percent of the current assets and accounts receivable makes up another 28 percent of current assets. Burt's current ratio = .93 times ...

Ye observed the following returns over timeyear

You have observed the following returns over time: Year BMG Market 1990 18% 13% 1991 4% 8% 1992 -12% 3% 1993 16% 10% 1994 18% 11% What is the beta for BMG?

The inside door has total debt of 76662 total equity of

The Inside Door has total debt of $76662, total equity of $224477, and a return on equity of 12.7 percent. What is the return on assets? Input your answer as a decimal rounded to 4 places (i.e., 1% = 0.0100).

1 i dont understand what major benefits do corporations and

1. I don't understand what major benefits do corporations and investors enjoy because of the existence of organized security exchanges? 2. What is a dividend? 3. Within a corporation, who decides whether to pay dividen ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert