Purchase Solution

NPV

Not what you're looking for?

Ask Custom Question

Sacramento Paper is considering two mutaully exclusive projects. Project A has an internal rate of return of 12 percent, while project B has an IRR of 14 percent. The two projects have the same risk, and when the cost of capital is 7 percent the projects have the same net present value (NPV). Assume each project has an initial cash outflow followed by a series of inflows. Given this information, which of the follwing statements is most correct?

a. If the cost of capital is 13 percent, Project B's NPV will be higher than Project A's NPV
b. If the cost of capital is 9 percent, Project B's NPV will be higher than Projects A's NPV.
c. If the cost of capital is 9 percent, Project B's modified internal rate of return (MIRR) will be less thatn its IRR.
d. Statements a and c are correct.
e. All of the statements above are correct.

Purchase this Solution
Solution Summary

The solution explains how to select the correct alternative relating to NPV

Solution Preview

This problem can be solved by making the NPV profile. This is in the attached file.

The answer is
e. All of the ...

Purchase this Solution
Free BrainMass Quizzes
Lean your Process

This quiz will help you understand the basic concepts of Lean.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

View More Free Quizzes
Related BrainMass Solutions

  • NPV, IRR, and Sensitivity Analysis

    cash flow Year Cash flow ;+NPV ;-NPV ;+NPV ;-NPV ;+NPV ;-NPV 0 -$42,000 2% 3% 1.00 1.00 -$42,000 -$42,000 1..10 $4,700 2% 3% 8.98 8.53 $42,218 $40,092 NPV $218 -$1,908 IRR 2.10% 10% Decrease Discount

  • Expected NPV and standard deviation of NPV with real example

    What are the project's expected NPV and standard deviation of NPV? b. Should the base case analysis use the most likely NPV or expected NPV? Explain your answer. a.

  • NPV

    126133 NPV You have estimated 3 possible NPV outcomes for an investment under analysis, the expected NPV, the best case NPV and the worst case NPV. You have also gotten estimates from management on the probability of each of these three cases.

  • Coefficeint of variation of NPV

    (Expected NPV and standard deviation of NPV in thousands). The expected NPV, standard deviation of NPV, and coefficeint of variation of NPV is calculated when a probability distribution of NPV is given.

  • NPV, IRR and Profitability Index

    NPV=0.

  • Calculating NPV at Various Discount Rates

    What is the NPV at a discount rate of 11 percent? What is the NPV at a discount rate of 21 percent? What is the NPV at a discount rate of 29 percent?

  • NET PRESENT VALUE and internal rate of return FOR CAPITAL

    You can get the NPV for 0%. 4% NPV would be $46,822.37 8% NPV would be -$7,831.63 10% NPV would be -$32,419.23 NPV is calculated by finding the present value of each cash flow, including both cash inflows and outflows, discounted

  • NPV analysis of Jameson Cargile, Inc.

    NPV is just for analysis. B. The YellowJacket is a better choice because the negative NPV is greater than the negative NPV associated with the Bumblebee. C.

  • Internal rate of return

    the discount rate that makes NPV negative. the rate of return that makes the NPV positive. One disadvantage of the NPV method is that: Answer the NPV deals with cash flows.

  • Calculating Net Present Value

    PI= (I+NPV) / I where I=Investment if PI>0 then {(I+NPV) / I}>0 which means NPV> -I meaning NPV>0 where <0> is the limit of I NPV=0={C1 / (1+IRR)}-I={C1 / (1+k)}-I where C1 is the expected future net cash flow that means IRR=K As stated from

View More Related Solutions