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Alexxx [7]
1 year ago
6

A firm is considering projects s and l, whose cash flows are shown below. These projects are mutually exclusive, equally risky,

and not repeatable. The ceo wants to use the irr criterion, while the cfo favors the npv method. You were hired to advise the firm on the best procedure. If the wrong decision criterion is used, how much potential value would the firm lose?.
Mathematics
1 answer:
antiseptic1488 [7]1 year ago
6 0

If the wrong discion criterion is used, the potential lose in value for the firm is $209.07.

<h3>What is the correct decision criterion?</h3>

The  correct decision criterion is the net present value. Net present value is the present value of after-tax cash flows from an investment less the amount invested. The internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested

<h3>What is the loss in value if the wrong decision criteria is used?</h3>

The net present vaue and the internal rate of return can be calculated using the financial calcuator.

Project S:

  • Cash flow in year 0 = $-1025
  • Cash flow each year from year 1 to 4 = $380

I = 6%

NPV = 291.74

IRR = 17.86%

Project I:

Cash flow in year 0 = $-2150

Cash flow each year from year 1 to 4 = 765

I = 6%

NPV = 500.81

IRR = 15.78%

If the wrong criteria is used, Project S would be chosen.

Loss in value = 500.81 - 291.74 = $209.07.

Here are the cash flows used:

WACC: 6.00%

Year 0 1 2 3 4

CF S -$1,025 $380 $380 $380 $380

CF I -$2,150 $765 $765 $765 $765

To learn more about net present value, please check: brainly.com/question/25748668

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the difference of the largest value and the median
49-41 = 8

Hope this answers the question. Have a nice day. Feel free to ask more question.

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Semenov [28]
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Rick buys 3 CDs and 5 video games. The cost of one video game is $12.00 more than the cost of one CD. If Rick spends $164.00, wh
Dmitry [639]

Step-by-step explanation:

x = price per video game

y = price per CD

164 = 5x + 3y

and then we know

x = y + 12

now we can use this as substitute in the first equation :

164 = 5(y + 12) + 3y = 5y + 60 + 3y = 8y + 60

104 = 8y

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so, each CD costs $13.

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3 years ago
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levacccp [35]

Answer:

y = 3x + 2; y = -x + 4

Step-by-step explanation:

Slope intercept form is in y = mx + b, where m is the slope and b is the y-intercept. In the first image, 2 is the y-intercept and 3 is the slope, yielding the equation y = 3x + 2.

For the second, 4 is the y-intercept and -1 is the slope, so the answer to the second image is y = -x + 4.

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2 years ago
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Find the roots of:
Elena-2011 [213]

\large\displaystyle\text{$\begin{gathered}\sf \pmb{1) \  2x^3-7x^2+8x-3=0 } \end{gathered}$}

Synthetic division is used since the equation is of the third degree. The divisors of -3 are 1, -1, 3, +3. So:

  | 2  -7    8  -3

<u>1 |      2   -5   3</u>

  | 2   -5    3  0

<u> 1 |      2     -3   </u>

    2   -3     0

So the factorization is (x-1)² (2x-3)=0. So:

                     \bf{ x_1=x_2=1 \qquad x_2=\dfrac{3}{2}  }

\large\displaystyle\text{$\begin{gathered}\sf \pmb{2) \  x^3-x^2-4=0 } \end{gathered}$}

Synthetic division is used since the equation is of the third degree. The divisors of -4 are 1, -1, 2, -2, 4, -4. So:

      |  1  -1  0  -4

  <u>2  |     2  2     </u>

         1  2  2  0

So the factorization is (x-2)(x²+x+2)=0 . When calculating the discriminant of the trinomial, it is concluded that it has no roots since the result is negative. So you only have one solution.

                   \bf{ 1^2-4(2)(2)=1-16=-15 < 0 \quad \Longrightarrow \quad x=2 }

\large\displaystyle\text{$\begin{gathered}\sf \pmb{3) \  6x^3+7x^2-9x+2=0 } \end{gathered}$}

Synthetic division is used since the equation is of the third degree. The divisors of 2 are 1, -1, 2, -2. So:

   | 6    7       9      2

<u>-2 |      -12    10     -2</u>

     6    -5     1       0

So the factorization is (x+2)(6x²-5x+1)=0 . The quadratic equation is solved by the general formula:

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2 years ago
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