$2$

Remember when doing NPV & IRR, use my in$-$class assignment as a guide and utilize the PVA table when

$3$

applicable. This will be different than the method in Chapter $11,$ but will save you time.

$4$

$5$

Cerritos Company can invest in each of three cheese$-$making projects: $C1,C2,$ and $C3.$ Each

$\frac{6}{7}$

project requires an initial investment of $$438,374$ and would yield the following annual cash

$7$

flows.

$\backslash$table$[[8],[9],[10],[11],[12],[13],[14],[15],[16],[17]]$

$\backslash$table$[[$See my hints to the right$],[,,$C$1,,$C$2,$C$3,],[$Year $1,$$$,24,000,$$$,192,000,$$$,360,000],[$Year $2,,216,000,192,000,,120,000,],[$Year $3,,336,000,192,000,,96,000,],[$Totals$,$$$,576,000,$$$,576,000,$$$,576,000]]$

Required

$17$

A$-$ Assuming that the company requires a $12\%$ return from its investments, use net present value to

$18$

determine which projects, if any, should be acquired.

$19$

$20$

B$-$ Using the answer from part $1,$ explain whether the internal rate of return is higher or lower than $12\%$ for project C$2.$

$21$

$22$

$23$

C$-$ Compute the internal rate of return for project C$2$

$24$

$25$

Check: $3)$ IRR $=$approx $15\%$