A) Quark Industries has four potential projects, all with an initial cost of $2,000,000. The capital budget for the year will allow Quark Industries to accept only one of the four projects. Given the discount rates and the future cash flows of each project, determine which project Quark should accept.

B)Calculate the IRR of the projects above for Quark Industries. (Hint: you should use Excel for this problem.)

C) Calculate the MIRR of Project M for Quark Industries.

D) Chandler and Joey were having a discussion about which financial model to use for their new business. Chandler supports NPV and Joey supports IRR. The discussion starts to get heated Page 3 of 3 when Ross steps in and states, Gentlemen, it doesnt matter which method we choose, they give the same answer on all projects. Is Ross correct? Under what conditions will IRR and NPV be consistent when accepting or rejecting projects?

E) Calculate the profitability index of Project M for Quark Industries in problem 5. Should Quark Industries accept Project M?

Project O Project P Cash Flow Year 1 Year 2 Year 3 Year 4 Year 5 Discount rate Project N Project M $500,000 $600,000 $1,000,000 300,000 $500,000 $600,000 $ 800,000 $ 500,000 $500,000 $600,000 $500,000 $600,000 400,000 $ 900,000 $500,000 $600,000 $200,000 1,100,000 $ 700,000 6% 9% 15% 22%