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Chapter 10--Capital Budgeting

Student: ___________________________________________________________________________

1. Risk varies with project type, and the least risky of the capital projects, in terms of the probability of making
less than management's expectations is:
A. inventory management.
B. equipment replacement.
C. new business ventures.
D. expansion.

2. Capital projects are said to be mutually exclusive when:

A. the financial viability of a single project is being evaluated.
B. two or more projects are being evaluated and doing one precludes doing another.
C. one project is much easier to do than another.
D. b and c

3. The first step in the capital budgeting process is the identification of the project's:
A. cost of capital.
B. incremental cash flows.
C. investment requirement.
D. overall cash flows.

4. Incremental cash flows associated with capital budgeting projects can include:
A. reductions in labor costs.
B. reductions in fuel and maintenance costs.
C. increased profitability.
D. All of the above

5. Which of the following is most correct?

A. Stand-alone projects with positive NPV's should always be accepted.
B. Mutually exclusive projects with positive NPV's should always be accepted.
C. Projects can be mutually exclusive even if they address totally different business issues.
D. Both a. and c. are correct.
E. All of the above are correct.
6. The money needed to get a project started is generally referred to as the initial outlay. It includes all cash
outflows:
A. before the start of the project and in its first year.
B. throughout the life of the project.
C. before or at the start of the project, generally referred to as at time zero.
D. already spent.

7. Capital budgeting involves how companies spend:

A. day to day resources.
B. money raised in capital markets.
C. expenses only.
D. large sums on infrequent projects.

8. What are the two primary drawbacks to the payback period method?
A. Difficult to calculate; ignores time value of money
B. Difficult to calculate; only works for long projects (e.g., 5 years or more)
C. Ignores time value of money; ignores cash flows after payback is reached
D. Only works for long projects; ignores cash flows after payback is reached
E. Difficult to calculate; ignores cash flows after payback is reached

9. Rank order the following capital project types according to level of risk, from highest risk to lowest risk.
A. Expansion, New Venture, Replacement
B. Replacement, Expansion, New Venture
C. New Venture, Replacement, Expansion
D. Expansion, Replacement, New Venture
E. New Venture, Expansion, Replacement

10. Although quick and easy to apply, the payback method is deficient. In that it:
A. disregards the time value of money.
B. it assumes that inflows are reinvested at the internal rate of return until the end of the project’s life.
C. disregards cash flows after the payback period.
D. a and c

11. Which of the following is most correct?

A. A project can have more than one internal rate of return.
B. If a project has more than one internal rate of return, it cannot be accurately evaluated using the IRR method.
C. Multiple IRR's arise because nth-order equations have "n" solutions, even if some of them are imaginary.
D. Both a. and c. are correct.
E. All of the above are correct.
12. Which of the following best describes the reinvestment assumptions implicit in the internal rate of return
(IRR) method and the net present value (NPV) method?
A. Both NPV and IRR assume cash flows are reinvested at the cost of capital.
B. NPV assumes cash flows are reinvested at the cost of capital, while IRR assumes reinvestment at the IRR.
C. IRR assumes cash flows are reinvested at the cost of capital, while NPV assumes reinvestment at the IRR.
D. Both NPV and IRR assume cash flows are reinvested at the IRR.
E. None of the above describes the reinvestment assumptions used by NPV and IRR.

13. If a project's NPV is negative:

A. the project earns less than the cost of capital.
B. the investment will not add value or contribute to shareholder wealth.
C. the present value of expected cash outflows is greater than the present value of expected cash inflows.
D. All of the above

14. The internal rate of return is the rate of interest that makes the present value of a project’s cash inflows:
A. greater than the present value of its cash outflows.
B. less than the present value of its cash outflows.
C. equal to the present value of its cash outflows.
D. None of the above

15. The internal rate of return (IRR) is simply the return on a project viewed as an investment. Therefore any
project whose IRR exceeds the cost of capital:
A. should be undertaken if the company has the resources to do it.
B. contributes to wealth because it earns more than the cost of the money used to do it.
C. should not be undertaken because IRR isn't as good as NPV.
D. a and b

16. When using the net present value technique to evaluate the quality of an investment, if the resulting NPV is
positive, the cost of capital will generally be:
A. less than the internal rate of return.
B. greater than the internal rate of return.
C. equal to the internal rate of return.
D. None of the above
17. Mutually exclusive projects:
A. are usually different alternatives to meeting the same need.
B. occur where the acceptance or rejection of one alternative project has no bearing on the acceptance or
rejection of other projects.
C. are best analyzed by the profitability index.
D. None of the above

18. IRR does not include the following in its analysis:

A. the time value of money.
B. all of the project's cash flows.
C. a measure of the change in shareholders wealth.
D. a clearly defined, objective decision criteria.
E. All of the above

19. Payback does not include the following in its analysis:

A. the time value of money.
B. all of the project's cash flows.
C. a measure of the change in shareholders wealth.
D. All of the above

20. Project A has a payback period of 8 years, while Project B has a payback period of 7 years. The payback
policy maximum is 6 years. Which project should be accepted?
A. Project A, if they are mutually exclusive
B. Project B, if they are mutually exclusive
C. Both Project A and Project B
D. Neither Project A or Project B

21. When the NPV and IRR rules produce conflicting investment decisions, then the:
A. NPV rule is superior.
B. IRR rule is superior.
C. firm should be indifferent between the IRR rule and NPV rule.
D. payback period rule should be used.
E. a and d
22. The payback period of a project is defined as:
A. the number of years required for cumulative profits from a project to equal the initial outlay.
B. the number of years required for the cumulative cash flows from a project to equal the initial outlay.
C. the number of years required for the cumulative cash flows from a project to equal the
average investment in the project.
D. a period of time sufficient to earn a rate of return equal to the firm's cost of capital.

23. One weakness of the internal rate of return approach is that:

A. it does not directly consider the timing of the cash flows from a project.
B. it fails to provide a straightforward decision rule.
C. it implicitly assumes that the firm is able to reinvest the interim cash flows from a project at the firm's cost of
capital.
D. None of the above

24. The relationship between NPV and IRR is such that:

A. both approaches always provide the same ranking of alternative investment projects.
B. the IRR of a project is equal to the firm's cost of capital if the NPV of a project is $0.
C. if the NPV of a project is negative, the IRR must be greater than the cost of capital.
D. None of the above

25. The main criticism of the Payback method is:

A. it doesn't use time value.
B. it ignores cash flows after the payback is reached.
C. it assumes that inflows can be reinvested at the internal rate of return.
D. a and b

26. The most difficult part of the capital budgeting process is:
A. choosing which method to use.
B. doing the correct calculations.
C. many parts are equally important and difficult.
D. estimating the cash flows involved.

27. IRR is:

A. guaranteed to give the right answer.
B. not as good as the Payback method because it's tedious and involved to calculate.
C. conceptually and mathematically very closely tied to NPV.
D. not involved in an "NPV Profile."
28. A stand-alone project should be undertaken only if:
A. the cost of capital is greater than the project's IRR.
B. the cost of capital is equal to the project's IRR.
C. the cost of capital is less than the project's IRR.
D. the NPV of the project is zero.

29. Which of the following statement(s) is(are) true for the application of the IRR in a capital budgeting
decision?
A. The IRR must exceed the cost of capital to warrant undertaking the project.
B. The project's IRR is dependent on the project's cost of capital.
C. The IRR is similar to a bond's yield in that both generate a zero NPV.
D. a and c

30. Technical problems associated with the internal rate of return include:
A. the possibility of multiple IRRs, which rarely present practical difficulties.
B. the assumption that all cash flows are reinvested at the IRR.
C. Neither of the above
D. Both of the above

31. The modified internal rate (MIRR) of return eliminates the:

A. average return problem of IRR.
B. negative cost of capital under the NPV method.
C. the reinvestment and multiple solutions problems of IRR.
D. present value problem of the payback period method.

32. How is the MIRR better than the IRR method of capital budgeting?
A. Present and future values are calculated using the cost of capital rather than the IRR.
B. The cash inflows are projected at the beginning of the project.
C. Present value of all cash flows are considered to calculate the rate of return.
D. Cash flows are projected to the end of the project using the IRR.

33. One of the steps involved in calculating the MIRR is to:

A. calculate the future value of all cash outflows.
B. determine the present values of all cash outflows at the cost of capital.
C. determine the present value of cash inflows at the cost of capital.
D. subtract cash outflows from cash inflows before calculating the future value.
34. Swift Limited is considering a project with the following cash flows. Calculate the approximate MIRR of
the project. The cost of capital is 10 percent.

Year CF
($)
0 (15,000)
1 1,000
2 2,500
3 (2,000)
4 12,000
5 14,000

A. 15%
B. 25%
C. 13%
D. 14%

35. Gamma Inc. is considering two mutually exclusive projects with the following cash flows. Based on their
approximate MIRRs, which project should the company accept? Gamma’s cost of capital is 8%.

Years Project A Project B

($ in millions) ($ in millions)
0 (100) (85)
1 65 44
2 (8) (5)
3 48 55

A. Project A, as it has an MIRR of 8%

B. Project B, as it has an MIRR of 5%
C. Project A, as it has an MIRR of 6%
D. Project B, as it has an MIRR of 6%

36. The MIRR is an interest rate that:

A. equates the present value of outflows with the present value of the future value of all inflows of a project.
B. equates the present value of all cash inflows with the cost of capital of a project.
C. is used to determine the rate of reinvestment of a project with multiple cash outflows.
D. is used to determine the net present value of a project.

37. The NPV and IRR techniques can give conflicting results:
A. in standalone cases where the project's NPV profile is downward sloping.
B. in mutually exclusive decisions in which the NPV profiles do not cross.
C. in mutually exclusive situations in which the NPV profiles cross anywhere.
D. in mutually exclusive decisions in which the NPV profiles cross in the first quadrant.
38. A project's NPV profile will cross the horizontal axis at:
A. the cost of debt.
B. the cost of capital.
C. the internal rate of return.
D. zero.

39. The profitability index (PI) is particularly useful in comparing mutually exclusive projects:
A. with different IRR's.
B. of different lengths.
C. of different sizes.
D. where the IRR and NPV select different projects.
E. in all of the above situations.

40. Consider a project with an initial investment and positive future cash flows. As the cost of capital is
increased, the:
A. IRR remains constant while NPV increases.
B. IRR decreases while NPV remains constant.
C. IRR remains constant while NPV decreases.
D. IRR increases while NPV remains constant.
E. IRR decreases while NPV decreases.

41. Although NPV is the best capital budgeting technique, most executives prefer to use:
A. payback because the calculations are easy.
B. profitability index because they are familiar with ratios.
C. IRR because people are more comfortable with rates of return than with the somewhat abstract notion of a
present valued dollar.
D. NPV adjusted for inflation because it overcomes the difficulties they have with the method.

42. A firm's cost of capital is:

A. the time value of money calculated on the capital owned by a business.
B. the average return it pays to investors for the use of their money.
C. the cost a firm incurs while operating a business.
D. None of the above

43. Although the payback method suffers from several deficiencies, it is widely used because it:
A. is quick.
B. is easy to apply and understand.
C. provides a rough screening device to eliminate poor projects.
D. All of the above
44. Which of the following is the most difficult step in the capital budgeting process?
A. Estimating cash flows
B. Applying the capital budgeting techniques
C. Interpreting the results
D. Determining how to finance the project

45. A decrease in the cost of capital will cause the ____ to decrease.
A. NPV
B. IRR
C. payback period
D. None of the above

46. A firm's financial managers have been asked to evaluate the following investment proposals:
1. a new mainframe computer to replace an existing computer for administrative processing
2. a new assembly line to expand production capacity
3. new kitchen equipment for an existing cafeteria kitchen
4. new food vending machines to replace the existing cafeteria kitchen
Which of the above proposals are mutually exclusive?
A. 1 and 2
B. 3 and 4
C. 1, 2, and 3
D. 1, 2, 3, and 4

47. Which of the following capital budgeting techniques does NOT take into account the cost of capital?
A. Payback Period
B. Net Present Value
C. Internal Rate of Return
D. Profitability Index
E. All of the above take into account the cost of capital.

48. A project's ____ is the sum of the present values of all cash inflows and outflows discounted at the cost of
capital.
A. NPV
B. IRR
C. payback period
D. All of the above
49. The profitability index is a variation of the ____ method.
A. NPV
B. IRR
C. payback
D. Both a & c

50. If a proposed investment's payback period is 3 years, its initial cost is $50,000, and its useful life is 10 years,
which of the following must be true?
A. Cash inflows over the investment's useful life total $150,000.
B. Cash inflows over the first three years total $50,000.
C. The accounting profits generated by the investment over the first three years total $50,000.
D. None of the above

51. An investment has a payback period of 5 years and a useful life of 10 years. If all other variables are held
constant, which of the following changes would reduce the payback period?
A. An increase in the investment's cost
B. An increase in the investment's useful life
C. An increase in the cash inflows in years 1 and 2
D. An increase in the cash inflows in years 9 and 10
E. None of above

52. A negative NPV indicates that a project:

A. has an IRR that exceeds the cost of capital.
B. is overpriced.
C. will reduce the value of a firm if accepted.
D. b and c
E. None of the above

53. The net present value (NPV) method assumes that cash flows are reinvested at the:
A. IRR.
B. cost of capital.
C. average rate it pays investors.
D. Both b & c
54. If a net present value analysis for a normal project gives an NPV greater than zero, an internal rate of return
calculation on the same project would yield an internal rate of return ____ the firm's cost of capital.
A. greater than
B. less than
C. equal to
D. Cannot be determined from the information given

55. The net present value method assumes that the cash flows over the life of the project are reinvested at:
A. the project's internal rate of return.
B. the risk-free rate.
C. the market capitalization rate.
D. the firm's cost of capital.

56. The internal rate of return method assumes that the cash flows over the life of the project are reinvested at:
A. the risk-free rate.
B. the firm's cost of capital.
C. the computed internal rate of return.
D. the market capitalization rate.

57. If the net present value of a project is positive then the:

A. project would be unacceptable under the internal rate of return method.
B. project would be acceptable under the payback method.
C. project's rate of return is greater than the firm's cost of capital.
D. All of the above are correct.

58. Which of the following is NOT true regarding an NPV profile?

A. It slopes downward and to the right.
B. They slope upward and to the left.
C. It graphs NPV versus IRR.
D. It crosses the horizontal axis at IRR.

59. A larger interest rate will reduce all of the following, except the:
A. initial cash flow.
B. net present value.
C. present value of future cash outlays.
D. profitability index.
60. Which of the following techniques ignores the time value of money?
A. NPV
B. IRR
C. Payback
D. All of the above consider the time value of money.

61. According to one study done some time ago, most small firms use the _____ method to evaluate capital
projects.
A. NPV
B. IRR
C. payback
D. PI

62. A project is acceptable under the profitability index technique if its:

A. PI is less than one.
B. PI is greater than one.
C. PI is greater than zero.
D. PI is greater than the initial outlay.

63. Which of the following can be used to make a comparison of projects with unequal lives?
A. Replacement Chain Method
B. Equivalent Annual Annuity Approach
C. Profitability Index
D. Both a & b
E. All of the above

64. You are evaluating two projects with unequal lives. Purchase of a high-quality machine will result in
positive cash flows for nine years, while purchase of a medium-quality machine will result in positive cash
flows for six years. At the end of each respective time period, the machine is expected to be worthless. How
many times will the medium-quality machine project have to be linked in order to come up with a common time
period?
A. Twice
B. Three times
C. Four times
D. Nine times
65. The easiest way to compare projects with unequal lives is by using:
A. IRR.
B. the replacement chain method.
C. the equivalent annual annuity method.
D. Either b or c

66. Which of the following best describes the appropriate way to evaluate mutually exclusive projects with
unequal lives?
A. NPV is the appropriate method because NPV is always the method of choice.
B. IRR is the appropriate method because IRR adjusts for the fact that the projects are not of the same length.
C. Replacement chain is the appropriate method because it equalizes the length of the unequal projects.
D. Equivalent annual annuity is the appropriate method because it adjusts for the fact that the projects are not of
the same length.
E. Both c. and d. are correct.

67. Capital rationing requires that companies:

A. always select the projects with the highest IRR's.
B. always select projects that fit within their capital constraints.
C. may reject some projects that have an IRR higher than the cost of capital.
D. Both b. and c. are correct.
E. All of the above are correct.

68. The objective in solving capital rationing problems is to:

A. accept all projects with a PI greater than 1.1.
B. maximize the average IRR of the projects that are accepted.
C. maximize the total NPV of the projects that are accepted.
D. minimize the firm's cost of capital.

69. Capital rationing may involve:

A. accepting projects with negative NPVs.
B. rejecting projects with positive NPVs.
C. limitations on the number of project proposals that are submitted for evaluation.
D. allocating available capital among all project proposals with positive NPVs.

70. A firm has the following investment opportunities:

Investment NPV IRR

Project A $150,000 $30,000 14%
Project B $125,000 $20,000 11%
Project C $100,000 $25,000 13%
If the cost of capital is 10% and the capital budget is limited to $280,000, which project(s) should the firm undertake?
A. Project A and project B
B. Project A and project C
C. Project B and project C
D. Project A

71. ____ involves selecting projects subject to a funding limitation.

A. Capital Budgeting
B. Capital Rationing
C. Cost of Capital
D. Capital Financing

72. Capital rationing may:

A. require omitting projects with higher IRRs while undertaking some with lower IRRs because they fit into the
budget constraint better.
B. be necessary because there is a budgetary limit on capital spending.
C. in practice be done intuitively for reasons that are not entirely financial.
D. All of the above

73. Capital rationing:

A. is a technique for allocating scarce financial resources among viable projects.
B. determines which projects pass the NPV and/or IRR tests.
C. implies that all projects with positive NPVs should be undertaken.
D. generally gives terrible results when done intuitively.

74. A firm has the following investment opportunities:

Investment NPV IRR

Project A $150,000 $30,000 14%
Project B $120,000 $20,000 13%
Project C $100,000 $25,000 12%
Project D $ 10,000 $ 6,000 11%

If the cost of capital is 10% and the capital budget is limited to $280,000, which project(s) should the firm undertake?
A. Project A, B, and C
B. Project A and C
C. Project A and B
D. Project A, B, and D
75. A project has the following cash flows:

0 1 2 3
($500) $100 $200 $250

What is the project's NPV if the interest rate is $6%?

A. ($17.76)
B. $482.24
C. ($537.78)
D. $22.44

76. Assume the following facts about a firm's financing in the next year:

Proportion of capital projects funded by debt = 45%

Proportion of capital projects funded by equity = 55%
Return received by bondholders = 8.0%
Return received by stockholders = 14.0%

The weighted cost of capital of this project is:

A. 11.0%.
B. $113,000.
C. 11.3%.
D. 10.7%.

77. A project has the following cash flows:

Year 0 1 2 3 4
Cash flow ($240,000) $60,000 $100,000 $60,000 $80,000

The project's payback period is:

A. four years.
B. three and one-half years.
C. three and one-quarter years.
D. None of the above

78. Atlantis Inc. is considering two mutually exclusive projects with the following cash flows:

Year 0 1 2 3 4
Project A ($120,000) $60,000 $40,000 $60,000 $80,000
Project B ($100,000) $60,000 $50,000 $0 $0
If Atlantis accepts projects that pay back in two years or less, which should be undertaken?
A. Project A
B. Project B
C. Both projects
D. Neither project

79. Sentry Oil Inc. is considering two mutually exclusive projects as follows:

Year 0 1 2 3 4
Cash flow A ($185,000) $60,000 $75,000 $70,000 $70,000
Cash flow B ($125,000) ($60,000) $95,000 $90,000 $95,000

Sentry's a cost of capital is 14%. It can spend no more than $350,000 on capital projects this year, which of the following statements is applicable
when evaluating the projects by the NPV method?
A. Both projects add shareholder wealth and should be undertaken.
B. Project B appears to add more shareholder wealth than project A and should be done.
C. Project A appears to add more shareholder wealth than project B and should be done.
D. Project B should be undertaken because it requires a smaller investment.

80. The future cash flows of a stand-alone capital project follow:

Year 0 1 2 3
Cash flow ($5,000) $2,500 $2,500 $2,500

If the company's cost of capital is 14%, what is the approximate NPV of the project?
A. $5,804
B. $1,217
C. $6,217
D. $804

81. A project requires an initial outlay of $100,000, and is expected to generate annual net cash inflows of
$28,000 for the next 5 years. Determine the payback period for the project.
A. 0.28 years
B. 1.4 years
C. 3.57 years
D. 17.86 years
82. An investment project requires an outlay of $100,000, and is expected to generate annual cash inflows of
$28,000 for the next 5 years. The cost of capital is 12 percent. Determine a net present value for the project.
A. $940
B. $100,940
C. $77,884
D. $40,000

83. An investment project requires an initial outlay of $100,000, and is expected to generate annual cash inflows
of $28,000 for the next 5 years. The cost of capital is 12 percent. Determine the internal rate of return for the
project (to the nearest tenth of one percent).
A. 12.0%
B. 12.6%
C. 3.6%
D. 12.4%

84. What is the net present value of a project that requires an initial investment of $76,000 and produces net
cash flows of $22,000 per year for 7 years? Assume the discount rate is 15 percent.
A. $91,520
B. $15,520
C. $78,000
D. $167,474

85. Sigma is thinking about purchasing a new clam digger for $14,000. The expected net cash flows resulting
from the digger are $9,000 in year 1, $7,000 in year 2, $5,000 in year 3, and $3,000 in year 4. Should Sigma
purchase this digger if its cost of capital is 12 percent?
A. Yes, NPV = $3,176
B. Yes, NPV = $5,084
C. Yes, NPV = $16,605
D. Yes, NPV= $19,084

86. What is the internal rate of return for a project that requires an initial investment of $76,000 and then
generates cash flows of $20,507 per year for 7 years?
A. 16%
B. 17%
C. 18.2%
D. 19%
87. J&J Manufacturing is considering a project with the following cash flows. Calculate the payback period of
the project.

Year CF
0 (100,000)
1 40,000
2 50,000
3 50,000

A. 1.2 years
B. 2.2 years
C. 3.2 years
D. 4.2 years

88. Calculate the profitability index for a project with the following cash flows. Assume a cost of capital of 10%

Year Cash Flow

0 (15,000)
1 5,000
2 8,000
3 10,000

A. 0.78
B. 1.13
C. 1.24
D. 1.57

89. What is the internal rate of return for a project that requires an initial outlay of $92,000 and generates a
single cash inflow of $25,750 in 5 years?
A. 10%
B. 12%
C. 15.3%
D. 13.1%

90. What is the internal rate of return of a project that has an initial outlay of $150,000 and net cash flows of
$40,000 for 5 years?
A. Between 10% and 11%
B. Between 9% and 10%
C. Between 11% and 12%
D. Between 12% and 13%
91. Calculate the NPV of a project requiring a $3,000 investment followed by an outflow of $500 in Year 1, and
inflows of $1,000 in Year 2 and $4,000 in Year 3. The cost of capital is 12%. (Round to nearest $)
A. $52
B. $198
C. $257
D. $486

92. Frazier Fudge, Inc. is considering 2 mutually exclusive projects with the following cash flows. Which
project should be accepted? Assume a cost of capital of 10%.

Years Project X Project Y

0 ($350) ($350)
1 $130 $200
2 $150 $120
3 $180 $120

A. Project X because NPV is $27.4

B. Project Y because NPV is $31
C. Project X because IRR is 13.7%
D. Project Y because IRR is 12.2%

93. Williamson Inc. is considering a project with the following cash flows. Calculate the payback period of the
project.

Year CF
0 (50,000)
1 (20,000)
2 60,000
3 100,000
4 10,000

A. 1.1 years
B. 2.1 years
C. 3.1 years
D. 4.1 years

94. What is the IRR of a project requiring a $1000 investment which yields cash inflows of $700, $700, and
$2000, in years 1, 2 and 3 respectively. The cost of capital is 12%. (Round to nearest %)
A. 32%
B. 46%
C. 54%
D. 75%
95. A stand-alone capital project has the following cash flows.

Year 0 1-5
Cash Flow ($100,000) $28,000

What is its NPV if the cost of capital is 10%?

A. $106,142
B. ($6,142)
C. $934
D. $6,142

96. The projected cash flows for two mutually exclusive projects are as follows:

Year Project A Project B

0 ($150,000) ($150,000)
1 0 50,000
2 0 50,000
3 0 50,000
4 0 50,000
5 250,000 50,000

If the cost of capital is 10%, the decidedly more favorable project is:
A. project B with an NPV of $39,539 and an IRR of 19.9%.
B. project A with an NPV of $5,230 and an IRR of 10.8%.
C. project A with an NPV of $39,539 and an IRR of 10.8%.
D. project B with an NPV of $5,230 and an IRR of 19.9%.

97. The future cash flows of a stand-alone capital project follow:

Year 0 1 2 3
Cash flow ($5,000) $2,000 $2,000 $2,000

With the project's approximate IRR?

A. 10%
B. 12%
C. 8%
D. ($26)

98. Capital budgeting analysis of mutually exclusive projects A and B yields the following:

Project A Project B
IRR 18% 22%
NPV $270,000 $255,000
Payback Period 2.5 yrs 2.0 yrs
Another random document with
no related content on Scribd:
 In addition, we recommend a fifth subcommission, to be known
as the subcommission on statistics, in the membership of which
there shall be one representative of each of the above
subcommissions. …

"The committee also suggests that there are certain subjects

of inquiry which appertain equally to all the groups into
which it has recommended that the Commission be segregated.
The subjects of immigration, of education, of combinations and
trusts, and of taxation at once suggest themselves as
belonging in this category. It is therefore recommended that
these subjects, one or more of them, be examined into by the
full Commission pending the organization of the several
subcommissions."

The subject to which the Commission gave earliest attention

was that of "Trusts and Industrial Combinations," on which it
submitted a preliminary report on the 1st of March, 1900.

See (in this volume)

TRUSTS.

{600}

UNITED STATES OF AMERICA: A. D. 1898 (June).

Act providing for the arbitration of disputes between
employers and employees in inter-state commerce.

The following are the main sections of a very important Act of

Congress, approved June 1, 1898, which provides for the
arbitration of disputes between railway and other employees
engaged in interstate commerce and the companies or
individuals employing them:

"That the provisions of this Act shall apply to any common

carrier or carriers and their officers, agents, and employees,
except masters of vessels and seamen, … engaged in the
transportation of passengers or property wholly by railroad,
or partly by railroad and partly by water, for a continuous
carriage or shipment, from one State or Territory of the
United States or the District of Columbia, to any other State
or Territory of the United States, or the District of
Columbia, or from any place in the United States to an
adjacent foreign country, or from any place in the United
States through a foreign country to any other place in the
United States. …

"Section 2. That whenever a controversy concerning wages,

hours of labor, or conditions of employment shall arise
between a carrier subject to this Act and the employees of
such carrier, seriously interrupting or threatening to
interrupt the business of said carrier, the chairman of the
Interstate Commerce Commission and the Commissioner of Labor
shall, upon the request of either party to the controversy,
with all practicable expedition, put themselves in
communication with the parties to such controversy, and shall
use their best efforts, by mediation and conciliation, to
amicably settle the same; and if such efforts shall be
unsuccessful, shall at once endeavor to bring about an
arbitration of said controversy in accordance with the
provisions of this Act.

"Section 3. That whenever a controversy shall arise between a

carrier subject to this Act and the employees of such carrier
which can not be settled by mediation and conciliation in the
manner provided in the preceding section, said controversy may
be submitted to the arbitration of a board of three persons,
who shall be chosen in the manner following: One shall be
named by the carrier or employer directly interested; the
other shall be named by the labor organization to which the
employees directly interested belong, or, if they belong to
more than one, by that one of them which specially represents
employees of the same grade and class and engaged in services
of the same nature as said employees so directly interested:
Provided, however, That when a controversy involves and
affects the interests of two or more classes and grades of
employees belonging to different labor organizations, such
arbitrator shall be agreed upon and designated by the
concurrent action of all such labor organizations; and in
cases where the majority of such employees are not members of
any labor organization, said employees may by a majority vote
select a committee of their own number, which committee shall
have the right to select the arbitrator on behalf of said
employees. The two thus chosen shall select the third
commissioner of arbitration; but, in the event of their
failure to name such arbitrator within five days after their
first meeting, the third arbitrator shall be named by the
commissioners named in the preceding section. A majority of
said arbitrators shall be competent to make a valid and
binding award under the provisions hereof. The submission
shall be in writing, shall be signed by the employer and by
the labor organization representing the employees, shall
specify the time and place of meeting of said board of
arbitration, shall state the questions to be decided, and
shall contain appropriate provisions by which the respective
parties shall stipulate, as follows:

"First. That the board of arbitration shall commence their

hearings within ten days from the date of the appointment of
the third arbitrator, and shall find and file their award, as
provided in this section, within thirty days from the date of
the appointment of the third arbitrator; and that pending the
arbitration the status existing immediately prior to the
dispute shall not be changed: Provided, That no employee shall
be compelled to render personal service without his consent.

"Second. That the award and the papers and proceedings,

including the testimony relating thereto certified under the
hands of the arbitrators and which shall have the force and
effect of a bill of exceptions, shall be filed in the clerk's
office of the circuit court of the United States for the
district wherein the controversy arises or the arbitration is
entered into, and shall be final and conclusive upon both
parties, unless set aside for error of law apparent on the
record.

"Third. That the respective parties to the award will each

faithfully execute the same, and that the same may be
specifically enforced in equity so far as the powers of a
court of equity permit: Provided, That no injunction or other
legal process shall be issued which shall compel the
performance by any laborer against his will of a contract for
personal labor or service.

"Fourth. That employees dissatisfied with the award shall not

by reason of such dissatisfaction quit the service of the
employer before the expiration of three months from and after
the making of such award without giving thirty days' notice in
writing of their intention so to quit. Nor shall the employer
dissatisfied with such award dismiss any employee or employees
on account of such dissatisfaction before the expiration of three
months from and after the making of such award without giving
thirty days' notice in writing of his intention so to
discharge.

"Fifth. That said award shall continue in force as between the

parties thereto for the period of one year after the same
shall go into practical operation, and no new arbitration upon
the same subject between the same employer and the same class
of employees shall be had until the expiration of said one
year if the award is not set aside as provided in section
four. That as to individual employees not belonging to the
labor organization or organizations which shall enter into the
arbitration, the said arbitration and the award made therein
shall not be binding, unless the said individual employees
shall give assent in writing to become parties to said
arbitration. …
 "Section 7. That during the pendency of arbitration under this
Act it shall not be lawful for the employer, party to such
arbitration, to discharge the employees, parties thereto,
except for inefficiency, violation of law, or neglect of duty;
nor for the organization representing such employees to order,
nor for the employees to unite in, aid, or abet, strikes
against said employer; nor, during a period of three months
after an award under such an arbitration, for such an employer
to discharge any such employees, except for the causes
aforesaid, without giving thirty days' written notice of an
intent so to discharge; nor for any of such employees, during
a like period, to quit the service of said employer without
just cause, without giving to said employer thirty days'
written notice of an intent so to do; nor for such
organization representing such employees to order, counsel, or
advise otherwise.
{601}
Any violation of this section shall subject the offending
party to liability for damages; Provided, that nothing herein
contained shall be construed to prevent any employer, party to
such arbitration, from reducing the number of its or his
employees whenever in its or his judgment business necessities
require such reduction. …

"Section 10. That any employer subject to the provisions of

this Act and any officer, agent, or receiver of such employer
who shall require any employee, or any person seeking
employment, as a condition of such employment, to enter into
an agreement, either written or verbal, not to become or
remain a member of any labor corporation, association, or
organization; or shall threaten any employee with loss of
employment, or shall unjustly discriminate against any
employee because of his membership in such a labor
corporation, association, or organization; or who shall
require any employee or any person seeking employment, as a
condition of such employment, to enter into a contract whereby
 such employee or applicant for employment shall agree to
contribute to any fund for charitable, social or beneficial
purposes; to release such employer from legal liability for
any personal injury by reason of any benefit received from
such fund beyond the proportion of the benefit arising from
the employer's contribution to such fund; or who shall, after
having discharged an employee, attempt or conspire to prevent
such employee from obtaining employment, or who shall, after
the quitting of an employee, attempt or conspire to prevent
such employee from obtaining employment, is hereby declared to
be guilty of a misdemeanor, and, upon conviction thereof in
any court of the United States of competent jurisdiction in
the district in which such offense was committed, shall be
punished for each offense by a fine of not less than one
hundred dollars and not more than one thousand dollars."

United States Statutes at Large,

volume 30, page 424.

UNITED STATES OF AMERICA: A. D. 1898 (June).

The War with Spain.
Seizure of the island of Guam.

The following order, dated May 10, 1898, was addressed by the
Secretary of the Navy to the Commander of the U. S. S.
'Charleston':

"Upon the receipt of this order, which is forwarded by the

steamship 'City of Pekin' to you at Honolulu, you will proceed
with the 'Charleston' and 'City of Pekin' in company, to
Manila, Philippine Islands. On your way, you are hereby
directed to stop at the Spanish Island of Guam. You will use
such force as may be necessary to capture the port of Guam,
making prisoners of the governor and other officials and any
armed force that may be there. You will also destroy any
fortifications on said island and any Spanish naval vessels
that may be there, or in the immediate vicinity. These
operations at the Island of Guam should be very brief, and
should not occupy more than one or two days. Should you find
any coal at the Island of Guam, you will make such use of it
as you consider desirable. It is left to your discretion
whether or not you destroy it. From the Island of Guam,
proceed to Manila and report to Rear-Admiral George Dewey, U.
S. N., for duty in the squadron under his command."

In a despatch dated June 24, Captain Glass, of the

"Charleston," reported the execution of these orders as
follows: "I have the honor to report that in obedience to the
Department's telegraphic order of May 24, 1898, this ship
sailed from Honolulu, Hawaiian Islands, on the 4th instant for
Manila with the transports 'City of Pekin,' 'Australia,' and
'City of Sydney' under convoy. When clear of land, I opened
the confidential order of May 10, 1898, and changed course for
the Island of Guam, next day informing Commander Gibson, in
charge of transports, and Brigadier-General Anderson,
commanding expeditionary force, of the change in my orders and
that the transports would accompany the 'Charleston.' Arriving
off the north end of the island at daylight, June 20, I first
visited the port of Agana, the capital of Guam, and of the
Mariana group, and finding no vessels there of any kind,
proceeded to San Luis D'Apra, where it was expected that a
Spanish gunboat and a military force would be found, a rumor
to that effect having reached me while at Honolulu. Arriving
off the port at 8.30 a. m., it was found that Fort Santiago,
on Oroté Point, was abandoned and in ruins, and I steamed
directly into the harbor, having ordered the transports to
take a safe position outside and await instructions. A few
shots were fired from the secondary battery at Fort Santa Cruz
to get the range and ascertain if it was occupied. Getting no
response, ceased firing and came to anchor in a position to
control the harbor, and it was then found that this fort also
was abandoned. The only vessel in port was a small Japanese
trading vessel from Yokohama. An officer had just shoved off
from the ship to board the Japanese vessel, and obtain
 information as to the condition of affairs on shore, when a
boat was seen approaching the ship, through the reefs at the
head of the harbor, flying the Spanish flag and bringing two
officers, the captain of the port, a lieutenant-commander in
the Spanish navy, and the health officer, a surgeon of the
Spanish army. These officers came on board, and, in answer to
my questions, told me they did not know that war had been
declared between the United States and Spain, their last news
having been from Manila, under date of April 14. I informed
them that war existed and that they must consider themselves
as prisoners. As they stated that no resistance could be made
by the force on the island, I released them on parole for the
day, to proceed to Agana and inform the governor that I
desired him to come on board ship at once, they assuring me
that he would do so as soon as he could reach the port. While
awaiting the return of these officers, an examination was made
of the harbor, the only dangers to navigation were buoyed, and
the transports came in during the afternoon.

"At 5 p. m. the governor's secretary, a captain in the Spanish

army, came on board, bringing me a letter from the governor,
in which he stated that he was not allowed by law to go on
board a foreign vessel and requested me to meet him on shore
for a conference. This letter is appended, marked A. As it was
then too late to land a party, from the state of the tide on
the reef between the ship and the landing place, I directed
the secretary to return and say to the governor that I would
send an officer ashore with a communication for him early next
day.
{602}
… At 8.30 a. m. on June 21 Lieutenant William Braunersreuther
was sent ashore, under flag of truce, with a written demand
for the immediate surrender of the defenses of the Island of
Guam and all officials and persons in the military service of
Spain. Mr. Braunersreuther was directed to wait half an hour
only for a reply, to bring the governor and other officials on
board as prisoners of war in case of surrender, or in case of
 refusal or delay beyond the time given, to return and take
command of the landing force, which he would find in
readiness, and proceed to Agaña. At 12.15 p. m. Mr.
Braunersreuther returned to the ship, bringing off the
governor and three other officers, his staff, and handed me a
letter from the governor acceding fully to my demand. Having
received the surrender of the Island of Guam, I took formal
possession at 2.45 p. m., hoisting the American flag on Fort
Santa Cruz and saluting it with 21 guns from the 'Charleston.'
From a personal examination of Fort Santa Cruz, I decided that
it was entirely useless as a defensive work, with no guns and
in a partly ruinous condition, and that it was not necessary
to expend any mines in blowing it up. The forts at Agaña, San
Luis D'Apra, and Umata are of no value and no guns remain in
the island except four small cast-iron guns of obsolete
pattern at Agaña, formerly used for saluting, but now
condemned as unsafe even for that purpose. No Spanish vessel
of war has visited Guam during the last eighteen months. No
coal was found on the island."

Annual Reports of the Navy Department, 1898,

volume 2, pages 151-3.

UNITED STATES OF AMERICA: A. D. 1898 (June-July).

War with Spain.
Expedition of the army under General Shafter
against Santiago de Cuba.
Battles of El Caney and San Juan Hill.

To co-operate with the navy in operations for the capture of

Santiago de Cuba, and of the Spanish fleet blockaded in the
harbor of that town, orders were issued from Washington on the
31st of May, by Major-General Miles, Commanding the Army,
"with the approval of the Secretary of War," which directed
General Shafter, commanding the forces assembled at Tampa,
Florida, to place them on transports and proceed with them,
under convoy of the navy, to Santiago. Owing to an extreme
lack of both railway and harbor facilities at Tampa, an entire
week was consumed in the embarkation of the troops and
supplies. When on shipboard, the expedition was delayed
another week by false reports of the appearance of Spanish
cruisers on the Cuban coast, which seemed to the Washington
authorities to call for a stronger naval convoy to guard the
transport fleet. It was not until the 14th of June that the
fleet was permitted to sail, with 16,000 men. It arrived off
Guantanamo, near Santiago, on the morning of the 20th.

Meantime, the blockading fleet had bombarded the forts at

Santiago twice, on the 6th and on the 16th, and had silenced
them, for the time being, on both occasions, but apparently
with no permanent effect. With more success, two vessels from
the fleet had entered the harbor of Guantanamo on the 7th and
taken possession of the lower bay, where a marine battalion
was landed on the 10th and established in camp, to hold ground
until the army arrived. Meantime, also, communication with
General Garcia, commanding Cuban forces, had been opened, and
arrangements made, the results of which were subsequently
acknowledged by General Miles, in his annual report, as
follows:

"General Garcia regarded my requests as his orders, and

promptly took steps to execute the plan of operations. He sent
3,000 men to check any movement of the 12,000 Spaniards
stationed at Holguín. A portion of this latter force started
to the relief of the garrison at Santiago, but was
successfully checked and turned back by the Cuban forces under
General Feria. General Garcia also sent 2,000 men, under
Perez, to oppose the 6,000 Spaniards at Guantánamo, and they
were successful in their object. He also sent 1,000 men, under
General Ríos, against the 6,000 men at Manzanillo. Of this
garrison, 3,500 started to reenforce the garrison at Santiago,
and were engaged in no less than thirty combats with the
Cubans on their way before reaching Santiago. … With an
additional force of 5,000 men General Garcia besieged the
 garrison of Santiago, taking up a strong position on the west
side and in close proximity to the harbor, and he afterwards
received General Shafter and Admiral Sampson at his camp near
that place. He had troops in the rear, as well as on both
sides of the garrison at Santiago before the arrival of our
troops."

Annual Reports of the War Department, 1898,

volume 1, part 2, page 16.

The troops from Tampa, under General Shafter, arriving on the

20th, were disembarked on the 22d, 23d and 24th, at Daiquiri,
and advanced to Siboney. The first resistance encountered was
at La Guasima, three miles from Siboney, on the Santiago road,
where the Spaniards were driven from strong entrenchments by a
part of Young's brigade of General Wheeler's cavalry division
(dismounted). The brigade thus first in the fighting was
composed of the 1st and 10th regiments of regular cavalry and
the 1st United States Volunteer cavalry, commonly called the
"Rough Riders." After the engagement at La Guasima, six days
were occupied in concentrating the army (including the Cuban
auxiliaries of General Garcia), mostly at Sevilla, a short
distance beyond La Guasima, on the same road, and in
overcoming great difficulties of transportation for supplies.

On June 30, General Shafter reconnoitered the country around

Santiago and made his plan of attack. "From a high hill," says
his subsequent report, "from which the city was in plain view,
I could see the San Juan Hill and the country about El Caney. The
roads were very poor, and, indeed, little better than
bridlepaths, until the San Juan River and El Caney were
reached. The position of El Caney, to the northeast of
Santiago, was of great importance to the enemy as holding the
Guantanamo road, as well as furnishing shelter for a strong
outpost that might be used to assail the right flank and rear
of any force operating against San Juan Hill. In view of this
I decided to begin the attack next day at El Caney with one
 division, while sending two divisions on the direct road to
Santiago, passing by El Poso House, and, as a diversion, to
direct a small force against Aguadores from Siboney along the
railroad by the sea, with a view of attracting the attention
of the Spaniards in the latter direction and of preventing
them from attacking our left flank.

"During the afternoon I assembled the division commanders and

explained to them my general plan of battle. Lawton's division
[composed of Chaffee's, Miles' and Ludlow's brigades],
assisted by Capron's light battery, was ordered to move out
during the afternoon toward El Caney, to begin the attack
there early the next morning.

{603}
Map Illustrating the Santiago Campaign…

{604}

After carrying El Caney, Lawton was to move by the Caney road

toward Santiago and take position on the right of the line.
Wheeler's division of dismounted cavalry [embracing Sumner's
brigade—3d, 6th and 9th regular cavalry, and Young's brigade
mentioned above] and Kent's division of infantry [Wikoft's,
Hawkins's and Pearson's brigades] were directed on the
Santiago road, the head of the column resting near El Poso,
toward which heights Grimes's battery moved on the afternoon
of the 30th, with orders to take position thereon early the
next morning and at the proper time prepare the way for the
advance of Wheeler and Kent on San Juan Hill. The attack at
this point was to be delayed until Lawton's guns were heard
at El Caney and his infantry fire showed he had become well
engaged.

"The remainder of the afternoon and night was devoted to

cutting out and repairing the roads and to other necessary
preparations for battle. These preparations were far from what
I desired them to be; but we were in a sickly climate; our
supplies had to be brought forward by a narrow wagon road,
which the rains might at any time render impassable; fear was
entertained that a storm might drive the vessels containing
our stores to sea, thus separating us from our base of
supplies; and lastly, it was reported that General Pando, with
8,000 reenforcements for the enemy, was en route from
Manzanillo and might be expected in a few days. Under those
conditions I determined to give battle without delay.

"Early on the morning of July 1, Lawton was in position around

El Caney, Chaffee's brigade [7th, 12th, and 13th U. S.
Infantry] on the right, across the Guantanamo road; Miles's
brigade [1st, 4th, and 25th U. S. Infantry] in the center, and
Ludlow's [8th and 22d U. S. Infantry and 2d Microcassettes
Volunteers] on the left. The duty of cutting off the enemy's
retreat along the Santiago road was assigned to the latter
brigade. The artillery opened on the town at 6.15 A. M. The
battle here soon became general and was hotly contested. The
enemy's position was naturally strong and was rendered more so
by blockhouses, a stone fort, and entrenchments cut in solid
rock, and the loopholing of a solidly built stone church. The
opposition offered by the enemy was greater than had been
anticipated, and prevented Lawton from joining the right of
the main line during the day, as had been intended.

"After the battle had continued for some time Bates's brigade
of two regiments (3d and 20th United States Infantry] reached
my headquarters from Siboney. I directed him to move near El
Caney, to give assistance, if necessary. He did so and was put
in position between Miles and Chaffee. The battle continued
with varying intensity during most of the day and until the
place was carried by assault, about 4.30 p. m. As the
Spaniards endeavored to retreat along the Santiago road,
Ludlow's position enabled him to do very effective work and to
practically cut off all retreat in that direction.

"After the battle at El Caney was well opened and the sound of
the small-arms fire caused us to believe that Lawton was
driving the enemy before him, I directed Grimes's battery to
open fire from the heights of El Poso on the San Juan'
blockhouse, which could be seen situated in the enemy's
entrenchments extending along the crest of San Juan Hill. This
fire was effective and the enemy could be seen running away
from the vicinity of the blockhouse. The artillery fire from
El Poso was soon returned by the enemy's artillery. They
evidently had the range of this hill, and their first shells
killed and wounded several men. As the Spaniards used
smokeless powder it was very difficult to locate the positions
of their pieces, while, on the contrary, the smoke caused by our
black powder plainly indicated the position of our battery.
"At this time the cavalry division [of General Wheeler] under
General Sumner (commanding temporarily in consequence of the
illness of General Wheeler, who returned to duty that day],
which was lying concealed in the general vicinity of the El
Poso House, was ordered forward, with directions to cross the
San Juan River and deploy to the right on the Santiago side,
while Kent's division was to follow closely in its rear and
deploy to the left. These troops moved forward in compliance
with orders, but the road was so narrow as to render it
impracticable to retain the column of fours formation at all
points, while the undergrowth on either side was so dense as
to preclude the possibility of deploying skirmishers. It
naturally resulted that the progress made was slow, and the
long range rifles of the enemy's infantry killed and wounded a
number of our men while marching along this road and before
there was any opportunity to return this fire. At this time
Generals Kent and Sumner were ordered to push forward with all
possible haste and place their troops in position to engage the
enemy. General Kent, with this end in view, forced the head of
his column alongside of the cavalry column as far as the
narrow trail permitted, and thus hurried his arrival at the
San Juan and the formation beyond that stream. A few hundred
yards before reaching the San Juan the road forks, a fact that
was discovered by Lieutenant-Colonel Derby, of my staff, who
had approached well to the front in a war balloon. This
information he furnished to the troops, resulting in Sumner
moving on the right-hand road, while Kent was enabled to
utilize the road to the left. … After crossing the stream, the
cavalry moved to the right with a view of connecting with
Lawton's left when he should come up, and with their left
resting near the Santiago road. In the meanwhile Kent's
division, with the exception of two regiments of Hawkins's
brigade, being thus uncovered, moved rapidly to the front from
the forks previously mentioned in the road, utilizing both
trails, but more especially the one to the left, and crossing
the creek formed for attack in the front of San Juan Hill."
 Annual Reports of the War Department, 1898,
volume 1, part 2, page 147.

"The particulars of this gallant attack, which won the hill

and decided the fate of Santiago, are given with more
clearness in the report of General Kent, who commanded the
division which had most of the fighting to do, than in that of
General Shafter. Wikoff's 'heroic brigade,' writes General
Kent, 'consisting of the 13th, 9th, and 24th United States
Infantry, speedily crossed the stream and were quickly
deployed to the left of the lower ford.
{605}
While personally superintending this movement Colonel Wikoff
was killed, the command of the brigade then devolving upon
Lieutenant-Colonel Worth, 13th Infantry, who immediately fell
severely wounded, and then upon Lieutenant-Colonel Liscum,
24th Infantry, who, five minutes later, also fell under the
withering fire of the enemy. The command of the brigade then
devolved upon Lieutenant-Colonel E. P. Ewers, 9th Infantry.
Meanwhile I had again sent a staff officer to hurry forward
the second brigade [Pearson's] which was bringing up the rear.
The 10th and 2d Infantry, soon arriving at the forks, were
deflected to the left to follow the Third Brigade [Wikoff's],
while the 21st was directed along the main road to support
Hawkins [whose brigade was composed of the 6th and 16th U. S.
Infantry and the 71st New York Volunteers].

"Crossing the lower ford a few minutes later, the 10th and 2d
moved forward in column in good order toward the green knoll …
on the left. Approaching the knoll the regiments deployed,
passed over the knoll, and ascended the high ridge beyond,
driving back the enemy in the direction of his trenches. I
observed this movement from the Fort San Juan Hill. … Prior to
this advance of the second brigade, the third, connecting with
Hawkins's gallant troops on the right, had moved toward Fort
San Juan, sweeping through a zone of most destructive fire,
scaling a steep and difficult hill, and assisting in capturing
the enemy's strong position (Fort San Juan) at 1.30 p. m. This
crest was about 125 feet above the general level and was
defended by deep trenches and a loopholed brick fort
surrounded by barbed-wire entanglements. General Hawkins, some
time after I reached the crest, reported that the 6th and 16th
Infantry had captured the hill, which I now consider
incorrect. Credit is almost equally due the 6th, 9th, 13th,
16th, and 24th regiments of infantry. … The Thirteenth
Infantry captured the enemy's colors waving over the fort, but
unfortunately destroyed them. …

"The greatest credit is due to the officers of my command,

whether company, battalion, regimental, or brigade commanders,
who so admirably directed the formation of their troops,
unavoidably intermixed in the dense thicket, and made the
desperate rush for the distant and strongly defended crest, I
have already mentioned the circumstances of my third brigade's
advance across the ford, where, in the brief space of ten
minutes, it lost its brave commander (killed) and the next two
ranking officers by disabling wounds; yet in spite of these
confusing conditions the formations were effected without
hesitation, although under a stinging fire, companies acting
singly in some instances and by battalions and regiments in
others, rushing through the jungle, across the stream, waist
deep, and over the wide bottom thickly set with barbed-wire
entanglements. …

"The enemy having retired to a second line of rifle pits, I

directed my line to hold their positions and intrench. At ten
minutes past 3 p. m. I received almost simultaneously two
requests—one from Colonel Wood, commanding a cavalry brigade,
and one from General Sumner—asking for assistance for the
cavalry on my right, 'as they were hard pressed.' I
immediately sent to their aid the 13th Infantry, who promptly
went on this further mission, despite the heavy losses they
had already sustained. Great credit is due to the gallant
officer and gentleman, Brigadier General H. S. Hawkins, who,
placing himself between the two regiments, leading his
brigade, the 6th and 16th Infantry, urged and led them by
voice and bugle calls to the attack so successfully
accomplished."

Annual Reports of the War Department, 1898,

volume 1, part 2, page 164.

The part borne by the dismounted cavalry division in the

capture of the Spanish intrenchments on San Juan Hill is
described as follows in the report of General Sumner,
temporarily in command:

"After crossing the creek with sufficient strength to hold it

and protect the crossing, I received verbal orders to move by
the right flank to connect with Lawton's left. During the
execution of this movement a balloon, under command of Colonel
Derby, came up the road, forcing open Wood's Brigade and
cutting it in two, thereby delaying the movement. The
artillery fire of the enemy opened upon the balloon and
continued for more than an hour, thereby subjecting part of my
command massed and the rest moving by the flank to long
shrapnel fire. Many officers and men were wounded here by
exploding shells and small arms' firing of the enemy. After
completing the deployment the command was so much committed to
battle that it became necessary either to advance or else
retreat under fire.

"Lieutenant Miley, representing General Shafter, authorized an

advance, which was ordered, Carroll's brigade taking the
advance, reinforced on the right by Roosevelt's regiment and
supported by the 1st and 10th Cavalry of Wood's Brigade. The
advance was made under heavy infantry fire through open flat
ground, cut up by wire fences, to the creek, dIstant about 600
yards. The advance was made in good order, the enemy's fire
being returned only under favorable opportunities. In crossing
 the flat one officer (Captain O'Neil) and several men were
killed and several officers and men wounded. Both sides of the
creek are heavily wooded for about 200 yards. The creek was
swollen, and the crossing through this space and the creek was
made with great difficulty. After passing through the thick
woods the ground was entirely open and fenced by wire. From
this line it was necessary to storm the hill, upon the top of
which is a house loopholed, etc., for defense. The slope of
the hill is very difficult, but the assault was made with
great gallantry and with much loss to the enemy. In this
assault Colonel Hamilton, Lieutenants Smith and Shipp were
killed; Colonel Carroll, Lieutenants Thayer and Myer were
wounded. A number of casualties occurred among the enlisted
men. After taking this hill the front line advanced to take
the Fort San Juan Hill under fire from strong force of the
enemy in trenches and house known as 'Blockhouse.' … The
assault was successful, the line storming the trenches and
blockhouse with conspicuous gallantry and coolness, capturing
three prisoners, wounding and killing many of the enemy. …
Connected with my left, Hawkins's brigade of Kent's division
carried everything in front of it and captured the house and
hill known as 'Fort San Juan' proper."

Annual Reports of the War Department, 1898,

volume 1, part 2. page 370.

{606}

Lieutenant Colonel Roosevelt, who commanded the Rough Riders

regiment that day, while Colonel Wood commanded the brigade,
tells the story of the fight, and what followed, very tersely,
in his report: "After crossing the river at the ford," says
the Lieutenant-Colonel, "we were moved along and up its light
bank under fire, and were held in reserve at a sunken road.
Here we lost a good many men, including Captain O'Neil,
killed, and Lieutenant Haskell, wounded. We then received your
order to advance and support the regular cavalry in the attack