Purple Whale is evaluating a proposed capital budgeting project (project sigma) that will require an initial investment of $900,000. Purple Whale has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions.
The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Purple Whale's WACC is 9% and project sigma has the same risk as the firm's average project.
The project is expected to generate the following net cash flows:
Year 1 325,000
Year 2 450,000
Year 3 425,000
Year 4 450,000
Which of the following is the correct calculation of project sigma's IRR?
a. 22.34%,
b. 27.93%,
c. 23.74%,
d. 25.14%
If this is an independent project, the IRR method states that the firm should (accept or reject)? project sigma??
If mutually exclusive projects are proposed that both have an IRR greater than the necessary WACC, the IRR method states that the firm should accept which of the following:
A. the project with the greater future cash inflows, assuming that both projects have the same risk as the firm's average project.
B. the project with the greatest IRR, assuming that both projects have the same risk as the firm's average project.
C. The project that requires the lowest initial investment, assuming that both projects have the same risk as the firm's average project.
Answers: 3
Other questions on the subject: Business
Business, 22.06.2019 20:30, capybaracaptin2895
Considered alone, which of the following would increase a company's current ratio? a. an increase in net fixed assets. b. an increase in accrued liabilities. c. an increase in notes payable. d. an increase in accounts receivable. e. an increase in accounts payable.
Answers: 3
Business, 22.06.2019 21:40, mackenziemelton26
Which of the following is one of the main causes of inflation? a. wages drop so workers have to spend a higher percentage of income on necessities. b. demand drops and forces producers to charge more to meet their costs. c. rising unemployment cuts into national income. d. consumers demand goods faster than they can be supplied.
Answers: 3
Business, 22.06.2019 23:10, erykaa
Mbo works by objectives moving through the organization; that is, top managers set general organizational objectives, which are translated into divisional objectives, which are translated into departmental objectives. the hierarchy ends in individual objectives set by each employee. this is an example of mbo working as objectives through the organization.
Answers: 1
Business, 22.06.2019 23:30, icantspeakengles
Sally mitchell works as a manager at an environmental organization. she is currently working on a global warming project and decides which tasks related to creating awareness about the issue need to be done. in addition, she is also deciding which members of her team will work on engaging with the public and which will work on lobbying with the government. she is also assigning people as team members to ensure that tasks are undertaken on time. which of the following categories of functions is mitchell undertaking? envisioning organizing controlling planning
Answers: 1
You know the right answer?
Purple Whale is evaluating a proposed capital budgeting project (project sigma) that will require an...
Questions in other subjects:
Mathematics, 15.07.2019 14:40
History, 15.07.2019 14:40
