20) You are considering the following two mutually exclusive projects. The required return on each project is 12 percent. Which project should you accept and what is the best reason for that decision?

Year/ Cash Flow A/ Cash Flow B

0/ -$32,000.00/ -$26,000.00

1/ $11,500.00 /$23,500.00

2/ $15,900.00 /$5,800.00

3/ $13,200.00 /$4,900.00

A) Project A, because it has the higher net present value B) Project A, because it pays back faster C) Project B, because it has the higher internal rate of return D) Project B, because it has the higher net present value E) Project A, because it has the higher internal rate of return

21) What is the IRR of the following set of cash flows?

Year/ Cash Flow A

0/ -$61,300.00

1/ $18,900.00

2/ $64,500.00

3/ $17,600.00

A) 17.78 percent B) 29.34 percent C) 24.95 percent D) 22.39 percent E) 28.61 percent

22) Textiles Unlimited has gathered projected cash flows for two projects. At what interest rate would the company be indifferent between the two projects?

Year /Cash Flow A /Cash Flow B

0 /-$10,000.00 /-$5,000.00

1/ $142,200.00/ $52,600.00

2/ $34,600.00/ $139,400.00

3/ $38,700.00/ $35,500.00

A) 22.41 percent B) 19.16 percent C) 29.11 percent D) -15.14 percent E) -19.49percent

23) A projects cost is the difference between:

A) future cash flows and its net profit. B) cash inflows and outflows. C) NPV and the present value of future cash flows. D) assets and liabilities. E) risk and its market value.

24) A projects IRR is the:

A) discount rate that results in a net present value equal to the project's initial cost. B) discount rate that causes a project's after-tax income to equal zero. C) rate of return required by the project's investors. D) project's current market rate of return. E) None of the above