Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. ( time-disparity problem ) the state spartan corpo

( Time-disparity problem ) The State Spartan Corporation is considering two mutually exclusive projects. The free...

70.2K

Verified Solution

Question

Finance

( Time-disparity problem ) The State Spartan Corporation isconsidering two mutually exclusive projects. The free cash flowsassociated with these projects are shown in the popup window:

PROJECT A

PROJECT B

Initial outlay

? $70,000

? $70,000

Inflow year 1

19,625

0

Inflow year 2

19,625

0

Inflow year 3

19,625

0

Inflow year 4

19,625

0

Inflow year 5

19,625

120,000

The required rate of return on these projects is 9 percent.

A. What is each project's payback period?

B. What is each project's NPV ?

C. What is each project's IRR ?

D. What has caused the ranking conflict?

E. Which project should be accepted? Why?

Answer & Explanation Solved by verified expert
3.9 Ratings (433 Votes)
aProject A Payback period full years until recovery unrecovered cost at the start of the yearcash flow during the year 3 years 70000 58875 70000 3 years 01589 316 years Project B Payback period 4 years 120000 70000 120000 4 years 5000070000 4 years 07143 471 years bProject A Net present value is solved here using a financial calculator The steps to solve on the financial calculator Press the CF button CF0 70000 It is entered with a negative sign since it is a cash outflow Cash flow for all the years should be    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

( Time-disparity problem ) The State Spartan Corporation isconsidering two mutually exclusive projects. The free cash flowsassociated with these projects are shown in the popup window:PROJECT APROJECT BInitial outlay? $70,000? $70,000Inflow year 119,6250Inflow year 219,6250Inflow year 319,6250Inflow year 419,6250Inflow year 519,625120,000The required rate of return on these projects is 9 percent.A. What is each project's payback period?B. What is each project's NPV ?C. What is each project's IRR ?D. What has caused the ranking conflict?E. Which project should be accepted? Why?

Other questions asked by students

Q

3-2-1kathleen wants to know whether height and shoe size are realted in women. She stops and...

Basic Math
Q

4. Explain the difference between a positive and negative hormonal feedback loop. How is the testis...

Biology
Q

A person who was slightly dehydrated went to donate blood, but they forgot that they had...

Medical Sciences
Q

A property costs $100,000. A borrower can obtain an 80% loan with an 8% interest rate...

Finance
Q

Is the stock market leading the economy or is the economy leading the stock market and why...

Finance
Q

25 White coherent light 400 nm 700 nm is sent through the slits of a...

Physics
Q

For an ohmic substance the electron drift velocity is proportional to A the cross sectional...

Physics
Q

In the figure shown a block executes SHM under the influence of two springs on...

Physics
Q

Suppose that f(4) = 5 and f' (4) = -1. Find h'(4). Round your answer...

Basic Math
Q

You saw graphs in this lesson such as the one below that compared the recommended...

Statistics
Q

A wooden artifact from an ancient tomb contains 20 percent of the carbon-14 that is...

Algebra
Q

roblem 11 Let v 1 2 1 and v 1 2 4 1 ii 5...

Algebra