31. Project B; because it has the higher net present value Project A; because it
ID: 2619689 • Letter: 3
Question
31.
Project B; because it has the higher net present value
Project A; because it has the higher internal rate of return
Project A; because it has the higher net present value
Project A; because it pays back faster
Project B; because it has the higher internal rate of return
30.
Ryder Industries is considering a project that will produce cash inflows of $92,000 a year for three years followed by $60,000 a year for the following four years. What is the internal rate of return if the initial cost of the project is $275,000?
23.45 percent
17.26 percent
25.23 percent
19.67 percent
21.28 percent
Project B; because it has the higher net present value
Project A; because it has the higher internal rate of return
Project A; because it has the higher net present value
Project A; because it pays back faster
Project B; because it has the higher internal rate of return
30.
Ryder Industries is considering a project that will produce cash inflows of $92,000 a year for three years followed by $60,000 a year for the following four years. What is the internal rate of return if the initial cost of the project is $275,000?
23.45 percent
17.26 percent
25.23 percent
19.67 percent
21.28 percent
Explanation / Answer
QUESTION – 30
The Answer is “ 21.28 percent “
Step – 1, Firstly calculate NPV at Say 20% [R1]
Net Present Value [NPV] at 20% = $8,684
Step – 2, NPV at 20% is positive, Calculate the NPV again at a higher rate, Say 22% [R2]
Net Present Value [NPV] at 22% = - $213 [Negative]
Internal Rate of Return [IRR] = R1 + NPV1(R2-R1)
NPV1-NPV2
= 20% + $8,684 (22% - 20%)
$8,684 - (-213)
Internal Rate of Return [IRR] = 20% + 1.28% = 21.28%
QUESTION – 31
Unable to figure out the answer. The Information regarding the cash flows and other details are missing in QUESTION-30. The Information’s are missing in the Question 31
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