7.a

b.

c.

d.

You will use the following information to answer 3 different questions (I will repeat it again, but it is the same information). You have been offered two contracts. The contracts are mutually exclusives. You estimate the following payoffs of each contract. Contract X: Year 0 $ 40,000; Year 1 $0; Year 2 $65,000. Contract Y: Year O $-100,000; Year 1 $65,000; Year 2 $65,000. What is the crossover rate? 5.80% 6.70% 8.30% 9.40% You will use the following information to answer 3 different questions (I will repeat it again, but it is the same information). You have been offered two contracts. The contracts are mutually exclusives. You estimate the following payoffs of each contract. Contract X: Year O $-40,000; Year 1 $0; Year 2 $65,000. Contract Y: Year 0 $-100,000; Year 1 $65,000; Year 2 $65,000. At what range of discount rates (if any) would you accept contract Y? if discount rate is greater than 19.4% if discount rate is less than 19.4% and greater than the crossover rate if discount rate is less than the crossover rate Always reject You will use the following information to answer 3 different questions (I will repeat it again, but it is the same information). You have been offered two contracts. The contracts are mutually exclusives. You estimate the following payoffs of each contract. Contract X: Year 0 $-40,000; Year 1 $0; Year 2 $65,000. Contract Y: Year 0 $-100,000; Year 1 $65,000; Year 2 $65,000. At what range of discount rates (if any) would you reject both project? if discount rate is greater than 19.4% Oif discount rate is greater than the crossover rate if discount rate is less than the crossover rate if discount rate is greater than 27.5% If there are multiple IRRs for a project, which of the following is wrong? The project must be a financing project The cash flows change sign more than once during the project There is at least one discount rate at which NPV is equal to 0 You can use NPV to decide whether to accept or reject a project