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? 

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? 




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? 




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 

@ % 
(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 

@ % 
(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? 




An investment has an installed cost of $562,382. The cash flows over the fouryear 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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