22. A company is trying to decide between two independent projects. Each project

Question

22. A company is trying to decide between two independent projects. Each project has a cost of capital of 12%. Project A has an IRR of 11.4%. Project B has an IRR of 11.1%. Which project should the company choose if the goal of the firm is to maximize shareholder wealth?

Question 22 options:

Project A Project B

Both projects should be chosen

Neither project should be chosen

This question cannot be answered unless we know the NPV of each project.

21. A company is trying to decide between two mutually exclusive projects. Each project has a cost of capital of 18%. Project A has an NPV of $215,000 and an IRR of 28.4%. Project B has an NPV of $154,000 and an IRR of $36.8%. Which project should the company choose if the goal of the firm is to maximize shareholder wealth? Question 21 options: Project A

Project B

Both projects should be chosen

Neither project should be chosen

Explanation / Answer

Question 22:

None of the projects should be chosen as both has a cost of capital higher than IRR of the project. However, if we have to choose one of these projects, Project A should be chosen as it has higher IRR.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.