Moving to anothor question will save this response. Question 6 Andrew has been a

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Moving to anothor question will save this response. Question 6 Andrew has been approached by Andrea to invest $12,000 in a project. As a neturn, Andrea promises $5,000 at the end of each year for 3 years.IFhis minimum required rate of retum is 8%, shoulid he inv OHe should imest since Andrea's rate of return is 6%, which is smaler than his hrde rate. He should invest sin Andrea's rate of return 8%, which meets his hurde mte nvest since Andrea's rate of return is 10%, which is greater than hishudeme. his hurdle rate. He should invest sinco Andreas rate of return is 12%. which is greater than Question & of 30 Moving to another question wil save this response. MacBook Air 888 ,a 6 5 4 3 2

Explanation / Answer

Q6. Answer is He should invest since Andrews rate of return is 12% which is more than hurdle rate. Explanation: Annual inflows 5000 Annuity factor for 3 yrs at12% 2.4018 Present value of inflows 12009 Less: Initial investment 12000 NPV 9 Hence IRR is 12% Q7. Answer is 4 years Explanation: Initial investment 50000 Annual Inflows 15000 Payback period 3.33 (Initial investment / Annual inflows)

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