Cullumber Corp. management is evaluating two independent projects. The costs and expected cash flows are given in the following table. The cost of capital is 13.73 percent. Year 0 1 2 3 4 5 Project A - $287,839 109,300 109,300 109,300 109,300 109,300 Project B - $401,058 138,190 162,830 179,500 118,800 a. Calculate the projects' NPV. (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) The NPV of project A is $ The IRR of Project A is There is b. Calculate the projects' IRR. (Round answer to 2 decimal places, e.g. 15.25%.) 119,800 Cullumber should choose Cullumber should choose c. Which project should be chosen based on NPV? Based on IRR? Is there a conflict? and project B is $ % and Project B is will be accepted. ◆ based on NPV. based on IRR. between the NPV and IRR decisions. d. If you are the decision maker for the firm, which project or projects will be accepted? %.
Cullumber Corp. management is evaluating two independent projects. The costs and expected cash flows are given in the following table. The cost of capital is 13.73 percent. Year 0 1 2 3 4 5 Project A - $287,839 109,300 109,300 109,300 109,300 109,300 Project B - $401,058 138,190 162,830 179,500 118,800 a. Calculate the projects' NPV. (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) The NPV of project A is $ The IRR of Project A is There is b. Calculate the projects' IRR. (Round answer to 2 decimal places, e.g. 15.25%.) 119,800 Cullumber should choose Cullumber should choose c. Which project should be chosen based on NPV? Based on IRR? Is there a conflict? and project B is $ % and Project B is will be accepted. ◆ based on NPV. based on IRR. between the NPV and IRR decisions. d. If you are the decision maker for the firm, which project or projects will be accepted? %.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 10P: Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year...
Related questions
Question
![Cullumber Corp. management is evaluating two independent projects. The costs and expected cash flows are given in
the following table. The cost of capital is 13.73 percent.
Year
0
1
2
3
4
5
Project A
- $287,839
109,300
109,300
109,300
109,300
109,300
Project B
- $401,058
The NPV of project A is $
There is
The IRR of Project A is
a. Calculate the projects' NPV. (Enter negative amounts using negative sign e.g. -45.25. Do not round
discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g.
1,525.)
138,190
Cullumber should choose
162,830
b. Calculate the projects' IRR. (Round answer to 2 decimal places, e.g. 15.25%.)
Cullumber should choose
179,500
118,800
119,800
c. Which project should be chosen based on NPV? Based on IRR? Is there a conflict?
and project B is $
% and Project B is
will be accepted.
◆ based on NPV.
based on IRR.
between the NPV and IRR decisions.
d. If you are the decision maker for the firm, which project or projects will be accepted?
%.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F690b508d-6741-414c-89f1-77cc54191c17%2F02aab764-c057-4364-bd9f-7efe4f13bee3%2Fsh49wc_processed.png&w=3840&q=75)
Transcribed Image Text:Cullumber Corp. management is evaluating two independent projects. The costs and expected cash flows are given in
the following table. The cost of capital is 13.73 percent.
Year
0
1
2
3
4
5
Project A
- $287,839
109,300
109,300
109,300
109,300
109,300
Project B
- $401,058
The NPV of project A is $
There is
The IRR of Project A is
a. Calculate the projects' NPV. (Enter negative amounts using negative sign e.g. -45.25. Do not round
discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g.
1,525.)
138,190
Cullumber should choose
162,830
b. Calculate the projects' IRR. (Round answer to 2 decimal places, e.g. 15.25%.)
Cullumber should choose
179,500
118,800
119,800
c. Which project should be chosen based on NPV? Based on IRR? Is there a conflict?
and project B is $
% and Project B is
will be accepted.
◆ based on NPV.
based on IRR.
between the NPV and IRR decisions.
d. If you are the decision maker for the firm, which project or projects will be accepted?
%.
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