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