1 You are evaluting a conventional project. This project requires an initial investment today and will generate positive cash flows in the next 5 years. The NPV of the project discounted at 12 percent is -$12,500. The internal rate of return must be 5.0 A less than 12 percent. B equal to 12 percent. C cannot tell without additional information D greater than 12 percent.

2 You are trying to determine which of two projects to undertake. Both projects have an initial outlay of $2,000. However, Project Y provides an after-tax cash flow of $1,000 each year for three years, while Project Z provides an after-tax cash flow of $600 each year for six years. The discount rate for both projects is 10 percent. The EAC for Project Y is:

A $186.85

B $162.28

C $111.79

D $195.76

3 Suppose that you are a loan officer at the US bank. You determine that the IRR of a loan is 27.99%. Which of the following is TRUE? 5.0 A The payback period will be smaller if the discount rate increases. B The loan is acceptable if US bank has a discount rate of 30%. C The loan is acceptable only if the discount rate is greater than 27.99%. D If US bank has a discount rate of 20%, then lending the loan will increase US bank's value.