41. XYZ Company is trying to decide between the following two…
Question Answered step-by-step 41. XYZ Company is trying to decide between the following two… 41. XYZ Company is trying to decide between the following two mutually exclusive capital budgeting projects Project #30 1 2 3 4|————- |————— |————— |—————- |-1000 575 625 750 1250 Project #40 1 2 3 4|————- |—————- |————– |—————- |-500 275 325 500 650 Using a required rate of return of WACC = 10%, the projects have the following NPV and IRR.: Project #3 NPV = $1,456.51 IRR = 58.36% Project #4 NPV = $838.21 IRR = 62.79% Which of the following statements is true of these two mutually exclusive projects?A. Project #3 should be accepted because of its higher NPV.B. Project #3 should be accepted because of its higher IRR.C. Project #4 should be accepted because of its lower IRR.D. Project #4 should be accepted because of its higher NPV.E. None of the above is true. 42. Refer to the projects described in question #41. If these two projects were independent, then:A. only Project #3 should be accepted because of its higher NPV.B. only Project #3 should be accepted because of its higher IRR.C. only Project #4 should be accepted because of its higher IRR.D. only Project #4 should be accepted because of its higher NPV.E. both projects should be accepted. 43. For a given capital budgeting project and a given set of cash flows (initial, operating, and terminal), the higher the cost of capital (WACC): A. the higher the NPV. B. the lower the NPV. C. the higher the IRR. D. then both A and C. E. then both B and C. 44. Assume you are analyzing a corporate bond with the following characteristics: Par value $1000 Coupon rate 8% per year Payment schedule semiannual Maturity 5 years. If the market price for this bond is $950, then:the yield-to-maturity will be less than 8%.the yield-to-maturity will be more than 8%.the yield-to-maturity will be equal to 8%.the yield-to-maturity will be equal to $1000.none of the above is true. 45. Refer to the bond described in #44. Assume that your required rate of return on this bond is 8% per year, compounded semiannually. With this required rate of return: A. the value of the bond will be equal to $1000. B. the value of the bond will be less than $1000. C. the value of the bond will be greater than $1000. D. it is impossible to judge the value of the bond based on the information given. E. none of the above is true. 46. Which of the following accounts is NOT included in a company’s capital? A. retained earnings C. paid-in capital B. preferred stock D. All are part of capital. E. None is a part of capital. 47. 0 1 2 3 4 years|————— |—————- |————— |—————-|-3000 275 325 500 (650 + 1500)Shown on the timeline above are the cash flows (initial, operating, and terminal) for a capital budgeting project. Given a weighted average cost of capital (WACC) of 8% per year, what is the project’s net present value (NPV)?A. – $1592.05 C. – $489.50B. – $967.27 D. – $571.17 E. none of the above 48. Refer to question #47 above. What is the internal rate of return (IRR) of the capital budgeting cash flows? A. 5.78% C. 8% B. 2.39% D. 4% E. none of the above 49. Refer to question #47 above. If the WACC were decreased to 6% (and the cash flows were left unchanged), then: A. the IRR would increase. B. the IRR would decrease. C. the IRR would be unchanged. D. the IRR would be zero. E. none of the above is true. Business Finance FIN 3213 Share QuestionEmailCopy link Comments (0)
