1. Capital budgeting criteria: mutually exclusive projects
Project S costs $11,000 and its expected cash flows would be $7,000 per year for 5 years. Mutually exclusive Project L costs $33,500 and its expected cash flows would be $10,900 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend?
I. Both Projects S and L, since both projects have IRR's > 0.
II. Project S, since the NPVS > NPVL.
III. Project L, since the NPVL > NPVS.
IV. Both Projects S and L, since both projects have NPV's > 0.
V. Neither S or L, since each project's NPV < 0.
2. Yesterday, you entered into a futures contract to sell €62,500 at $1.50 per €. Your initial performance bond is $1,500 and your maintenance level is $500. At what settle price will you get a demand for additional funds to be posted?
a. $1.4840 per €.
b. $1.5160 per €.
c. $1.1920 per €.
d. $1.1840 per €.