Monday, November 11, 2019

You are considering the following two mutually exclusive projects. The required rate of return is 14.6 percent


You are considering the following two mutually exclusive projects. The required rate of return is 14.6 percent for project A and 13.8 percent for project B. Which project should you accept and why?

    
 
A. 
project A; because it has the higher required rate of return

B. 
project A; because its NPV is about $4,900 more than the NPV of project B

C. 
project B; because it has the largest total cash inflow

D. 
project B; because it has the largest cash inflow in year one

E. 
project B; because it has the lower required return


 


61.
You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent?

    
 
A. 
accept project A as it always has the higher NPV

B. 
accept project B as it always has the higher NPV

C. 
accept A at 8.5 percent and B at 13 percent

D. 
accept B at 8.5 percent and A at 13 percent

E. 
accept B at 8.5 percent and neither at 13 percent


 


62.
Day Interiors is considering a project with the following cash flows. What is the IRR of this project?

    
 
A. 
6.42 percent

B. 
7.03 percent

C. 
7.48 percent

D. 
8.22 percent

E. 
8.56 percent


 

63.
An investment has the following cash flows and a required return of 13 percent. Based on IRR, should this project be accepted? Why or why not?

    
 
A. 
No; The IRR exceeds the required return by about 0.06 percent.

B. 
No; The IRR is less than the required return by about 1.53 percent.

C. 
Yes; The IRR exceeds the required return by about 0.06 percent.

D. 
Yes; The IRR exceeds the required return by about 1.53 percent.

E. 
Yes; The IRR is less than the required return by about 0.06 percent.

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