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Category > Business & Finance Posted 28 May 2017 My Price 7.00

Suppose you are evaluating two mutually

Suppose you are evaluating two mutually exclusive projects, Thing 1 and Thing 2, with the following cash flows:

 

End of Year Cash Flows

Year

Thing 1

Thing 2

2000

-$10,000

-$10,000

2001

3,293

0

2002

3,293

0

2003

3,293

0

2004

3,293

14,641

a. If the cost of capital on both projects is 5%, which project, if any, would you choose? Why?

b. If the cost of capital on both projects is 8%, which project, if any, would you choose? Why?

c. If the cost of capital on both projects is 11%, which project, if any, would you choose? Why?

d. If the cost of capital on both projects is 14%, which project, if any, would you choose? Why?

e. At what discount rate would you be indifferent between choosing Thing 1 and Thing 2?

f. On the same graph, draw the investment profiles of Thing 1 and Thing 2. Indicate the following items:

¦crossover discount rate

¦NPV of Thing 1 if the cost of capital is 5%

¦NPV of Thing 2 if cost of capital is 5%

¦IRR of Thing 1

¦IRR of Thing 2

 

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Status NEW Posted 28 May 2017 08:05 AM My Price 7.00

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