1) Suppose that a project will cost $90,000 initially and it will generate the following nonconventional cash flows:

Year 1: $130,000

Year 2: $115,000

Year 3: $170,000

a) If the required return is 20%, would you accept or reject the project? Why? Explain.

b) If the required return is 30%, would you accept or reject the project? Why? Explain.

c) Explain why the IRR generated by a financial calculator can be misleading to answer parts a and b?

d) What are the exact IRRs of this project within the 0% and 100% rate range? Solve in Excel and upload the Excel file on Blackboard.

e) Plot the data that you generate in part d to create a NPV profile figure in Excel as in Slide 34 of Chapter 9.