2. The Tool Box needs to purchase a new machine costing $1.46 million. Management is estimating the machine will generate cash inflows of $223,000 the first year and $600,000 for the following three years. If management requires a minimum 12 percent rate of return, should the firm purchase this particular machine? Why or why not?

		No, because the IRR is 10.75 percent
		Yes, because the IRR is 12.74 percent
		The answer cannot be determined as there are multiple IRRs
		Yes, because the IRR is 10.75 percent
		No, because the IRR is 12.74 percent

2.

Felix Inc has a prospective project with an IRR of 7.50%. Its cost of preferred equity, cost of common equity, and post-tax cost of debt are 7%, 9%, and 4%, respectively, and Sparta raises equal amounts of funding from all these three sources. Choose the best statement:

		The projects NPV must be negative.
		The projects net present value (NPV) must be $0.
		There is insufficient information to assess either the required rate or the NPV of the project.
		The projects required rate of return must be greater than 7.50%.
		The projects NPV must be positive.