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 discount rate is 9 percent.
a. Calculate the NPV of the proposed project.
b. Why would IRR be a poor choice in this situation?



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  • CreatedFebruary 25, 2015
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