Project IRR Cost NPV at 9%
A 18% $4,000,000 1,000,000
B 16% $1,000,000 200,000
C 14% $5,000,000 900,000
D 12% $2,000,000 400,000
E 10% $3,000,000 100,000
15. Which set of projects would maximize shareholder wealth if they have a capital budget of $7,000,000?
a. A and C.
b. A and E.
c. A, B, and D.
d. B and D.
16. Suppose it can raise the following amounts at different costs of capital. Which set of projects would maximize shareholder wealth?
WACC Amount Raised
9% $10,000,000
11% $12,000,000
13% $15,000,000
a. A and B.
b. A, B, and C.
c. A, B, and D.
d. A, B, C, and D.
Project IRR Cost NPV at 9%
A 18% $4,000,000 1,000,000
B 16% $1,000,000 200,000
C 14% $5,000,000 900,000
D 12% $2,000,000 400,000
E 10% $3,000,000 100,000
15. Which set of projects would maximize shareholder wealth if they have a capital budget of $7,000,000?
a. A and C.
b. A and E.
c. A, B, and D.
d. B and D.
16. Suppose it can raise the following amounts at different costs of capital. Which set of projects would maximize shareholder wealth?
WACC Amount Raised
9% $10,000,000
11% $12,000,000
13% $15,000,000
a. A and B.
b. A, B, and C.
c. A, B, and D.
d. A, B, C, and D.
Related questions
A firm with a 8 percent WACC is evaluating two projects for this yearsâ capital budget. After-tax cash flows (in dollar), including depreciation, are as follows:
| YEAR | Project A ($) | Project B($) |
| 0 | -30,000,000 | -30,000,000 |
| 1 | 4,000,000 | 18,000,000 |
| 2 | 10,000,000 | 10,000,000 |
| 3 | 15,000,000 | 8,000,000 |
| 4 | 20,000,000 | 6,000,000 |
a. Describe the definition of NPV, IRR, and Payback period.
b. Calculate NPV, IRR, and Payback Period for each project.
c. Explain the numbers you obtain from the computations in part (b)
d. If this analysis is to evaluate independent projects, which project(s) should be recommended? Explain.
e. If this analysis is to evaluate mutually exclusive projects, which project should be recommended? Explain.
