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Posted by: Annie kavitha
Price Quoted by Student: $8
Posted On: 2011-04-21 02:02:20
 
Question

21. Two projects have the following NPVs and standard deviations:

 

 

Project A

Project B

NPV

200

300

Standard deviation

75

100

        

Which of the two projects is more risky?

 

22. Your firm has an opportunity to make an investment of $50,000. Its cost of capital is 12 percent.  It expects after tax cash flows (including the tax shield from depreciation) for the next 5 years to be as follows:

 

Year 1

$10,000

Year 2

20,000

Year 3

30,000

Year 4

20,000

Year 5

5,000

a)      Calculate the NPV

b)      Calculate the IRR (to the nearest percent

c)      Would you accept this project?

23. "All our projects are discounted at the same interest rate," says the treasurer of a large company.  Would you dispute the advisability of such a procedure?


Solutions
Which of the two projects is more risky? Standard
Price $8
Attachment 1: 21. Two projects have the following NPVs and standard deviations (2).doc
Solution Posted By: Annie kavitha    Posted on: 21-04-2011