* 22% 8:55 PM T-Mobile Meme 24 (10 points) Your first assignment in your new pos
ID: 2798193 • Letter: #
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* 22% 8:55 PM T-Mobile Meme 24 (10 points) Your first assignment in your new position as assistant financial analyst at RR ssijgnment, you have been asked not only to provide a recommendation but also to EXPLAIN YOUR DEGISON aimed at assessing your understanding of the capital-budgeting process. Both et these projects involve additions to RR Product's highly successful product line, and as a result, the required rate of return on both projects has been established at 12%. The expected cash flows from each project are as follows Products is to evaluate t two new capital-budgeting proposals. Because this is your 1 Project A $110,000 $20,000 30,000 40,000 50,000 70,000 Project B $200,000 $64,000 64,000 564,000 Initial Outlay Inflow 1 Inflow Yr 2 Inflow Yr 3 $64,000 Inflow Yr S 564,000 Here is your assignment a What is the NPV Inet cosh flow) for Project A? b. What is the NPV for Project B c. What is the IRR for project B. [IRR for Project A is 2097%) you can do both projects, what should you do? Pum e. if you can do one but not both, what should you do? EXPLAIN o00Explanation / Answer
d) If you can do both projects then select both because they have an IRR greater than 12% cost of capital/opportunity cost
e) If we can select only one project then we select the project with a higher NPV which is project A
Project A Project B Initial Outlay $ -1,10,000.00 $ -2,00,000.00 year 1 $ 20,000.00 $ 64,000.00 2 $ 30,000.00 $ 64,000.00 3 $ 40,000.00 $ 64,000.00 4 $ 50,000.00 $ 64,000.00 5 $ 70,000.00 $ 64,000.00 NPV $ 31,739.95 $ 30,705.68 IRR 20.97% 18.03%Related Questions
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