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Question;74.Kosovski Company is considering Projects S and L, whose;cash flows are shown below. These projects are mutually exclusive, equally;risky, and are not repeatable. If the decision is made by choosing the project;with the higher IRR, how much value will be forgone? Note that under some;conditions choosing projects on the basis of the IRR will cause $0.00 value to;be lost.;WACC;8.25%;0;1;2;3;4;CFS -$1,050;$675;$650;CFL;-$1,050;$360;$360;$360;$360;75.Nast Inc. is considering Projects S and L, whose cash;flows are shown below. These projects are mutually exclusive, equally risky;and not repeatable. If the decision is made by choosing the project with the;higher MIRR rather than the one with the higher NPV, how much value will be;forgone? Note that under some conditions choosing projects on the basis of the;MIRR will cause $0.00 value to be lost.;WACC;11.25%;0;1;2;3;4;CFS -$1,100;$375;$375;$375;$375;CFL;-$2,200;$725;$725;$725;$725;76.Yonan Inc. is considering Projects S and L, whose cash;flows are shown below. These projects are mutually exclusive, equally risky;and not repeatable. If the decision is made by choosing the project with the;shorter payback, some value may be forgone. How much value will be lost in this;instance? Note that under some conditions choosing projects on the basis of the;shorter payback will not cause value to be lost.;WACC;10.25%;0;1;2;3;4;CFS;-$950;$500;$800;$0;$0;CFL;-$2,100;$400;$800;$800;$1,000;77.Noe Drilling Inc. is considering Projects S and L, whose;cash flows are shown below. These projects are mutually exclusive, equally;risky, and not repeatable. The CEO believes the IRR is the best selection;criterion, while the CFO advocates the MIRR. If the decision is made by;choosing the project with the higher IRR rather than the one with the higher;MIRR, how much, if any, value will be forgone, i.e., what's the NPV of the;chosen project versus the maximum possible NPV? Note that (1) "true;value" is measured by NPV, and (2) under some conditions the choice of IRR;vs. MIRR will have no effect on the value lost.;WACC;8.00%;0;1;2;3;4;CFS;-$1,100;$550;$600;$100;$100;CFL;-$2,750;$725;$725;$800;$1,400;$130.43;Convert PDF to HTML

 

Paper#50963 | Written in 18-Jul-2015

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