1. You are considering two independent projects that have a required return of 15 percent. Project A has an initial cost of $198,700 and cash inflows of $67,200, $109,600, and $88,700 for years 1 to 3 respectively. Project B has an initial cost of $102,000 and cash inflows of $37,600 and $91,200 for years 1 and 2, respectively. Given this information, which one of the following statements is correct based on the NPV and IRR methods of analysis?
You should accept both projects
You should reject both projects
You should accept A and reject B
You should accept B and reject A
NPV indicates accept Project A while IRR indicates accepting Project B.
2. Non-marketed Claims: Your company has debt outstanding with a face value of 6 million dollars. The value of your firm, if entirely financed by equity, would be $17.85 million. The company also has 350,000 shares of stock in circulation and trading at a price of $38 per share of. The corporate tax rate is 35%.
Considering Modigliani & Miller Poposition I with Taxes (i.e. and therefore excluding the effects of non-tax imperfections), what should be the total market value of your enterprise?
None of these values are correct.
$19,300,000
$23,850,000
$19,950,000