C) Accept hed D) Ascepe Project A and ect Project E) Yos should so sse peyback,
ID: 2574340 • Letter: C
Question
C) Accept hed D) Ascepe Project A and ect Project E) Yos should so sse peyback, ase another methsod of analysis 15) The insernal sate of re 15) A The discon rae tt athe ne preses value of a preject oqusl to the invi cash ouslay Eqivale to the discount rate that makes the net presest value equal to one cash floss or a copuder 16) 16, Drinkable Water Syams is analyzing·myect with pnyecalash inflows of $137,400, 5189,300 od-$25,000 for years I to 3, respectively. The project costs 5236,000 and has heen assigned a discou rate of 14 percent Should this r accepied based on the discouing approach to the modied ioternal rate of reurs A Yes The MIR i 11.23perces Si Yes: The MIRR is 17.85 percen CNo The MRR is 13.48 perce Di Yec The MI is 13.45 pecent E) No; The MIRR is 17.85 perct s CORRECT il ave smaller liquidlity prmu thn ae finesbonds E) Marker nil bond bolden LoGExplanation / Answer
Project Cummulative Project Cummulative A B 0 (72,000) (72,000) (81,000) (81,000) 1 21,400 (50,600) 20,100 (60,900) 2 22,900 (27,700) 22,200 (38,700) 3 56,300 28,600 74,800 36,100 Payback period A=2+27700/28600 2.97 Payback period B=2+38700/36100 3.07 Since in this case payback period of both the project >2.5 So Option B Reject both the project is correct 15 Option A is correct, in which Present value of total inflow is equal to intial outflow 16 Option B, Yes the MIRRid 17.83 percent 17 Option D is correct that Corporate bonds often have higher default risk ppreimum than treasyru bonds
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