. A project has the following cash flows: $279,374.20$625,798.21 $350,000.00 0 W

Question

. A project has the following cash flows: $279,374.20$625,798.21 $350,000.00 0 Which of the following discount rates is equivalent to an IRR for t (Note: the cash flows in Year 0 and Year 2 are negative he project? A. 5.00% B. 16.00% C. 13.00% D. 9.00% 2. Pro ject A has an NPV of $1.450.65 with an initial cost of $10,000.00. Project B has an NPV of $1.345.67 with an initial cost of $8,000.00. If the projects are mutually exclusive, what should the firm do? A. Only accept project A. B. Accept both projects. C. Reject both projects. D. Only accept project B. 3. Which statement is true? A. When one project "precludes" the other project, the projects are considered contingent. y indexest when making a decision. C. A capital constraint is not applicable if two projects are independent with both NPVs greater than zero. D. Assuming a firm's reinvestment rate is less than a project's discount rate, the MNPV should be less than the NPV. 4. Project A has an NPV of S3.51 2.34 with an initial cost of S 12,000.00. Project B has an NPV of -$2,456.17 with an initial cost of $5,000.00. If the projects are contingent, what should the firm do? A. Only accept Project A. B. Reject both projects C. Accept both projects. D. Only accept Project B. 5·The risk-free security: A. has a correlation coefficient with the market portfolio of one. B. has a CAPM beta of 1.00. C. has a standard deviation greater than zero. D. has a covariance with the market portfolio of zero.

Explanation / Answer

Dear student thankyou for using chegg. when there are more than one questions than as per chegg policy we have to answer first question. Please refer the following solution and gives thumbsup. Calculation of NPV ( at rate 5%) Statement showing Cash flows Project 1 Particulars Time PVf 5% Amount($) PV Cash Outflows                -             1.00       2,79,374.20    2,79,374.20 PV of Cash outflows = PVCO    2,79,374.20 Cash inflows           1.00      0.9524       6,25,798.21    5,95,998.30 Cash inflows           2.00      0.9070     -3,50,000.00 -3,17,460.32 PV of Cash Inflows =PVCI    2,78,537.98 NPV= PVCI - PVCO              836.22 Calculation of NPV ( at rate 16%) Statement showing Cash flows Project 1 Particulars Time PVf 16% Amount($) PV Cash Outflows                -             1.00       2,79,374.20    2,79,374.20 PV of Cash outflows = PVCO    2,79,374.20 Cash inflows           1.00      0.8621       6,25,798.21    5,39,481.22 Cash inflows           2.00      0.7432     -3,50,000.00 -2,60,107.02 PV of Cash Inflows =PVCI    2,79,374.20 NPV= PVCI - PVCO                 -0.00 As at discount rate 16% NPV is 0 therefore IRR is 16% because at IRR, NPV is 0. therefore, answer is part B that is 16%

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