Butler Co is considering two mutualty exclusive projects(Prcject A and Pioject B
ID: 2791880 • Letter: B
Question
Butler Co is considering two mutualty exclusive projects(Prcject A and Pioject B) with the following prdecled cash flows Project A cash10,00052 roject B cash $50,000$10,000 $16,000 52,500 53,500 54,500 $5,000 $19,000 $21,000 med an analysis or these projects usig ton be NPV method and the IRR method, wth the reong tesut IRR (Project A) = 1777% IRR (Proect B: 10.77% 8% Butler pe The WACC for both projects NPV (Projéct A) $2,563 NPV (Project B)-$3 495 What decis on should Select one be made regarding these projects, and why? a Netnes project should be accepred Project B should be accepted, because it has the higher NPY, C Proect As old be accepted, becausehas lhe higher IRR b O d. No decision can be made, because the two methods (NPV and IRR) oive conncing resultsExplanation / Answer
NPV : Net Present value means total net cash inflow from a project, if the NPV is positivie means the project is good and acceptable.
IRR: IRR means the rate of return from the investment where rate of return and NPV is become to Zero,
Proejct B have the greater NPV but the project A have the hegher IRR means his return on investment is heigher then B, By investing the $ 10,000 only he is getting in return $ 2563 and in the Project B by investing $ 50,000 getting 3495.
So the project A will be accepted because have the greater IRR
Answer = Option C = project A will be accepted because it have the greater IRR
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.