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Category > Business & Finance Posted 30 May 2017 My Price 7.00

1. A five-year project, if undertaken

1. A five-year project, if undertaken, will require an initial investment of $95,000. The expected end-of-year cash flows are:

Year 1: $12,000

Year 2: $39,000

Year 3: $39,000

Year 4: $30,000

Year 5: $18,000

 

If the appropriate discount rate for this project is 15%, which of the following is a correct statement?

 

  1. Reject the project because its IRR is 13.56%
  2. Accept the project because its NPV is $6,500
  3. Accept the project because the IRR is 17.3%
  4. Reject the project because its NPV is -3330.70
  5. Both a and d are correct

 

2. The following table lists the capital budgeting analysis of four different independent projects with an equal life:

 

Project NPV IRR Discount Rate

A $4,500 15% 13%

B -$3,600 17% 18%

C $7,100 8% 6%

D $75 23% 22.5%

 

Which project(s) would you choose?

 

a. A only

b. C only

c. A and C

d. A, C, and D

e. A, B, C, and D

Answers

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Status NEW Posted 30 May 2017 03:05 AM My Price 7.00

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