Suppose you are offered 7 000 today but must make
Suppose you are offered $ 7,000 today but must make the following payments:
Year Cash Flows ($)
0 ........ $ 7,000
1 ........ - 3,700
2 ........ - 2,400
3 ........ - 1,500
4 ........ - 1,200
a. What is the IRR of this offer?
b. If the appropriate discount rate is 10 percent, should you accept this offer?
c. If the appropriate discount rate is 20 percent, should you accept this offer?
d. What is the NPV of the offer if the appropriate discount rate is 10 percent? 20 percent?
e. Are the decisions under the NPV rule in part (d) consistent with those of the IRR rule?

Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
    Tutors
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
OR
Relevant Tutors available to help