Project X is very risky and has an NPV of $3 million. Project Y is very safe and has an NPV of$2.5 million. They are mutually exclusive, and project risk has been properly considered in the NPV analyses. Which project should be chosen? Explain.

A firm has a $100 million capital budget. It is considering two projects, each costing$100 million. Project A has an IRR of 20% and an NPV of $9 million; it will be terminated after 1 year at a profit of$20 million, resulting in an immediate increase in EPS. Project B, which cannot be postponed, has an IRR of 30% and an NPV of $50 million. However, the firm’s short-run EPS will be reduced if it accepts Project B because no revenues will be generated for several years. a. Should the short-run effects on EPS influence the choice between the two projects?

What reinvestment rate assumptions are built into the NPV, IRR, and MIRR methods? Give an explanation for your answer.

What is a mutually exclusive project? How should managers rank mutually exclusive projects?

Why is the NPV of a relatively long-term project (one for which a high percentage of its cash flows occurs in the distant future) more sensitive to changes in the WACC than that of a short-term project?

What are three potential flaws with the regular payback method? Does the discounted payback method correct all three flaws? Explain.

Is an initial public offering an example of a primary or a secondary market transaction? Explain.

Your division is considering two projects with the following cash flows (in millions):

$$\begin{matrix} \text{ } & \text{0} & \text{1} & \text{2} & \text{3}\\ \text{Project A} & \text{-\$ 25} & \text{\$ 5} & \text{\$ 10} & \text{\$ 17}\\ \text{Project B} & \text{-\$ 20} & \text{\$ 10} & \text{\$ 9} & \text{\$ 6}\\ \end{matrix}$$

a. What are the projects’ NPVs assuming the WACC is 5%? 10%? 15%? b. What are the projects’ IRRs at each of these WACCs?	c. If the WACC was 5% and A and B were mutually exclusive, which project would you

Concerning NPV:
a. Describe how NPV is calculated, and describe the information this measure provides about a sequence of cash flows. What is the NPV criterion decision rule?
b. Why is NPV considered a superior method of evaluating the cash flows from a project? Suppose the NPV for a project's cash flows is computed to be $\$ 2,500$. What does this number represent with respect to the firm's shareholders?

Project X is very risky and has an NPV of 3 million dollars. Project Y is very safe and has an NPV of 2.5 million dollars. They are mutually exclusive, and project risk has been properly considered in the NPV analyses. Which project should be chosen? Explain.

calculating npv of a project

The Lotus Point Condo Project will contain both homes and apartments. The site can accommodate up to 10,000 dwelling units. The project must contain a recreation project: either a swimming–tennis complex or a sailboat marina, but not both. If a marina is built, then the number of homes in the project must be at least triple the number of apartments in the project. A marina will cost $1.2 million, and a swimming–tennis complex will cost$2.8 million. The developers believe that each apartment will yield revenues with an NPV of $48,000, and each home will yield revenues with an NPV of$46,000. Each home (or apartment) costs $40,000 to build. Formulate an IP to help Lotus Point maximize profits.

Name the regions of the electromagnetic spectrum from the shortest wavelengths to the longest wavelengths.

Assume that the risk-free rate increases, but the market risk premium remains constant. What impact would this have on the cost of debt? What impact would it have on the cost of equity?