Dr Nick

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    Kaplan University
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    University of Santo Tomas
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Category > Business & Finance Posted 15 Jun 2017 My Price 14.00

The projects internal rate of return does not change

Fin 3000 Can you answer the first Q and third Q, please? I hope you can check up these answer of another questions.

Class,

Due to a format error that I didn't notice until after class, Problem 3 didn't show properly. If you have downloaded

the file, please check. Make sure the title has "USE THIS ONE" in it.

The correct numbers are as follows:

  1. A firm with a WACC of 10% is considering the following mutually exclusive projects. Which project would you recommend and why?

2).

The projects internal rate of return does not change despite the change in the cost of capital.        

3).Mutually exclusive projects.

Both projects seem profitable since they have positive net present values and their internal rate of return is greater than the cost of capital but I would recommend project A since it has a higher present value.                               

Questions

11-8: Ethical considerations

The environmental effects should be into consideration when evaluating this project to enable the firm to identify ways to achieve sustainability in their business.                                                                  

The project has positive present values for both cases whether mitigated or not, and the internal rate of returns are above the required rate of return so the project is profitable and should undertaken. To ensure sustainability the environmental effects should be mitigated.

11-9: Ethical considerations

The environmental effects should be into consideration when evaluating this project to enable the firm to identify ways to achieve sustainability in their business.  

The project has a negative net present value and the IRR is less than the required rate of return for the first five years if mitigation is undertaken. In the other case it seems quite profitable but it may not be sustainable in the long run. The project can be undertaken since it solves the bigger problem of unemployment and the side effects should also be mitigated since though the project may seem unprofitable in the short run, in the long run it will yield high returns.     

11-17).Capital budgeting                   

11-20).NPV

Answers

Dr Nick
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Status NEW Posted 15 Jun 2017 05:06 PM My Price 14.00

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