<span>Marginal Cost of Capital may involve less calculation than WACC, however marginal cost may be calculated by incorporating tax rates, overhead, insurance or any other cost associated with acquiring the particular capital.</span>
Answer:
Project A
Years Cashflows Discount factor Present values
0 250,000 1 -250,000
1-10 45,100 6.144 277,094.40
Sum of all present value=NPV=27,094.40
IRR (by using trial and error method) = 12.4696%
Note: Discount factor for the year 1-10 is calculated by using annuity formula i.e [1-(1+10%)]/10% = 6.144
Project B
Years Cashflows Discount factor Present values
0 (350,000) 1 (350,000)
1 72,500 0.91 65,975
2 65,500 0.83 54,365
3 73,800 0.75 55,350
4 71,500 0.68 48,620
5 69,800 0.62 43,276
6 75,500 0.56 42,280
7 31,000 0.51 15,810
8 47,500 0.47 22,325
9 55,500 0.42 23,310
10 29,200 0.38 11,096
Sum of all present values=NPV=32,407
IRR(by using trial and error method=12.4186%
On the basis of NPV project B is better because it gives higher NPV than project A. Whereas, Project A is better than project B on the basis of IRR because project A has slightly higher IRR than project B.
b)The conflict between both the investment appraisal technique is likely due to different cash flow patterns of both the project. In such situation decision should be based on NPV because this is an absolute measure
Answer:
Exception reports
Explanation:
An exception report is a document that shows where actual performance deviated significantly from what was expected, usually in a negative direction. It shows what is abnormal. The exception report then focuses the attention of the management on those areas that would be needing immediate intervention.
The yearly rate of inflation in car prices over the 8 years that Dave bought his new car for $8,400 is <u>5.1%</u>.
<h3>What is inflation?</h3>
Inflation is the general increase in prices of goods and services in an economy which reduces the purchasing power of the consumers.
Based on the given information, the yearly increase in the inflation rate can be computed using the present value formula from an online finance calculator as below.
<h3>Data and Calculations:</h3>
N (# of periods) = 8 years
I/Y (Interest per year) = 5.1%
PMT (Periodic Payment) = $0
FV (Future Value) = $12,500
<u>Results:</u>
PV = 8,396.31 or $8,400
Total Interest $4,477.49
Thus, the yearly rate of inflation in car prices over the 8 years that Dave bought his new car for $8,400 is <u>5.1%</u>.
Learn more about inflation at brainly.com/question/8149429
