Your boss the chief financial officer (CFO) asked you to analyse 3 different projects under consideration by the company's board. All projects require an initial investment and then provide a perpetuity of cash flows with zero growth. All are equally risky with the same 10% pa required return. All figures are rounded to 4 decimal places. The projects can all be accepted and funded, they're not mutually exclusive.The projects' initial costs and perpetual annual cash flows were provided by the engineering and marketing departments and are believed to be accurate. You calculated the NPV's and IRR's in bold, and made some conclusions about which projects to accept or reject (stated in answer option d). The CFO thanked you for your swift work, but said there's just one thing wrong with your calculations or conclusions, and asked you to fix it up before the table and conclusions are shown at the board meeting tomorrow.Projects with 10% pa required return  Initial cashflow at t=0 Perpetual annualcash flow from t=1 NPV IRR  ($m) ($m) ($m) (% pa)Project A -40 16 (a) 120 40Project B -1,200 80 -400 (b) 6.6667Project C -26,000 1,400 -12,000 (c) 6.698  Which one of the following calculations or conclusions is NOT correct?Question 7Select one:a.$120 million is project A's NPV.b.6.6667% pa is project B's IRR.c.6.698% pa is project C's IRR.d.Accept project A but reject projects B and C.

There are two projects: project A and project B. Each of the project has the cost of Rs 100,000 and cost of capital for each project is 12 percent. The project's expected net cash flows are as follows: Year Project A Project B 0 Rs (100,000) Rs (100,000) 1 65,000 35,000 2 30,000 30,000 3 30,000 30,000 4 10,000 10,000 a. Calculate NPV for each project. Which project or projects should be accepted if they are independent? b. Calculate IRR for each project. Which project should be accepted if they are mutually exclusive?

You have two mutually exclusive projects. Both projects require initial investment of $20 million. Project 1 generated $4 million per year in perpetuity.Project 2 generated $3 million at the end of the first year and its revenue will grow 3% per year thereafter.The cash flows of both projects start at the end of the first year. <a> IRR<b> NPV, assume the cost of capital is 6%

An investor is considering three projects, A, B and C summarized in the table below.  Investment cost Annual operating profit Project life (years)Project A -70000 17000 5Project B -90000 15000 8Project C -60000 13000 6Suppose the investor can borrow funds at an interest rate of 6%, by using the NPV rule with a 5% discount rate, he should choose project _____. When using the IRR rule, he should ____ this project.

You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects X and Y. Each project has a cost of $10,000, and the cost of capital for each project is 12 percent. The projects" expected net cash flows are as follows:Expected Net Cash FlowsYear Project X Project Y0 ($10,000) ($10,000)1 6,500 3,5002 3,000 3,5003 3,000 3,5004 1,000 3,500Calculate each project's payback period, net present value (NPV), internal rate of return (IRR), and modified internal rate of return (MIRR).Which project or projects should be accepted if they are independent?Which project should be accepted if they are mutually exclusive?How might a change in the cost of capital produce a conflict between the NPV and IRR rankings of these two projects? Would this conflict exist if r were 5%? (Hint: Plot the NPV profiles.) Why does the conflict exist?

Use the template to calculate the net cash flows, NPV and IRR of the projects.Net Cash FlowProject/Year 0 1 2 3Project A Net Cash FlowProject B Net Cash FlowNPV of A = IRR (A) =NPV of B = IRR (B) =Working TableDiscount rate = 10.0%Item/Year 0 1 2 3Capital Costs - A -100Capital Costs - B -100Operating Costs - A-20 -25 -30Operating Costs - B-15 -20 -25Gross Revenues - A 70 65 60Gross Revenues - B 45 65 75Net Revenues - ANet Revenues - B