Cutler Compacts will generate cash flows of $30,000 in year 1, and $65,000 in year 2. However,

Question:

Cutler Compacts will generate cash flows of $30,000 in year 1, and $65,000 in year 2. However, if it makes an immediate investment of $20,000, it can instead expect to have cash streams of $55,000 in total in year 1 and $63,000 in year 2. The appropriate is 9 percent.
a. Calculate the NPV of the proposed project.
b. Why would IRR be a poor choice in this situation?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...