# Project #16412 - Finance Investment Decisions

 A firm evaluates all of its projects by applying the IRR rule.

 Year Cash Flow 0 –\$ 155,000 1 61,000 2 78,000 3 62,000

 Requirement 1: What is the project's IRR? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

 Internal rate of return %

 Requirement 2: If the required return is 13 percent, should the firm accept the project? (Click to select) No Yes

 Consider the following cash flows:

 Year Cash Flow 0 –\$ 33,500 1 14,500 2 17,200 3 11,900

 Required: What is the IRR of the above set of cash flows? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

 Internal rate of return %

 Romboski, LLC, has identified the following two mutually exclusive projects:

 Year Cash Flow (A) Cash Flow (B) 0 −\$ 63,000 −\$ 63,000 1 39,000 25,700 2 33,000 29,700 3 22,500 35,000 4 14,600 24,700

 Requirement 1: (a) What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage roundedto 2 decimal places (e.g., 32.16).)

 Internal rate of return Project A % Project B %

 (b) If you apply the IRR decision rule, which project should the company accept? (Click to select) Project A Project B

 Requirement 2: (a) Assume the required return is 14 percent. What is the NPV for each of these projects? (Do not round intermediate calculations.Round your answers to 2 decimal places (e.g., 32.16).)

 Net present value Project A \$ Project B \$

 (b) Which project will you choose if you apply the NPV decision rule? (Click to select) Project B Project A

 Requirement 3: (a) Over what range of discount rates would you choose Project A? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

 Project A (Click to select) Above Below @ %

 (b) Over what range of discount rates would you choose Project B? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

 Project B (Click to select) Below Above @ %

 (c) At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

 Discount rate %

 Kerron Company is presented with the following two mutually exclusive projects. The required return for both projects is 15 percent.

 Year Project M Project N 0 –\$141,000 –\$364,000 1 64,400 148,000 2 82,400 189,000 3 73,400 133,000 4 59,400 119,000

 Required: (a) What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).)

 IRR Project M % Project N %

 (b) What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

 NPV Project M \$ Project N \$

 (c) Which, if either, of the projects should the company accept? (Click to select) Project M Project N Both Neither

 An investment has an installed cost of \$562,382. The cash flows over the four-year life of the investment are projected to be \$191,584, \$235,318, \$183,674, and \$151,313.

 Requirement 1: If the discount rate is zero, what is the NPV? (Do not round intermediate calculations.)

 NPV \$

 Requirement 2: If the discount rate is infinite, what is the NPV? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.)

 NPV \$

 Requirement 3: At what discount rate is the NPV just equal to zero? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

 Discount rate %

 Subject Business Due By (Pacific Time) 11/17/2013 02:00 pm
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