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  3. 1 a firm is considering the following independent projects the...

Question: 1 a firm is considering the following independent projects the...

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1. A firm is considering the following independent projects.  The total amount of capital available for investment is $377.

 

    Project         Investment     Present value of
future cash flows
      NPV                 P.I.      
A $101  $136 $35 1.35
B $158   $181 $23 1.15
C $140   $217 $77 1.55
D $176   $214 $38 1.22
E $129   $189 $60 1.46

 

Which projects should the firm accept?

Select one:
 

2. To what should your realised return from a share be compared in order to determine whether it was a worthwhile investment?

Select one:
 
 

Project Beta is a 7-year project which requires an initial outlay of $5,000.  This outlay will be depreciated using straight-line depreciation over the life of the project.  It will generate incremental revenue of $2000 per year and incremental costs (excluding depreciation) of $400.  The tax rate is 30%.

What is the project's annual after-tax incremental earnings?

Select one:
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