Problems with the IRR method Acme Oscillators is considering an investment project that has the following rather unusual cash flow pattern: a. Calculate the project's NPV at each of the following discount rates: 0%,5%,10%,20%,30%,40%,50%. b. What do the calculations tell you about this projec's IRR? The IRR fule tells managers to invest if a project's IRR is greater than the cost of capitat, It Acme Oscillators' cost of capital is 8%, should the company accept or reject this investment? c. Notice that this project's greatest NPVs come at very high discount rates. Can you provide an intuitive explanation for that pattern? d. If Acme Oscillators' cost of capital is 8%, should the company accept or reject this investme0t based on MIRR? a. Calculate the NPV at the following discount rates for this investment: 0%,5%,10%,20%,30%,40%,50%. The NPV at 0% is $. (Round to the nearest dollar.) The NPV at 5% is $. (Round to the nearest dollar.) The NPV at 10% is $. (Round to the nearest dollar.) The NPV at 20% is \$. (Round to the nearest dollar.) The NPV at 30% is $. (Round to the nearest dollar.) The NPV at 40% is $. (Round to the nearest dollar.) The NPV at 50% is $. (Round to the nearest dollar.) b. What do the calculations tell you about this project's IRR? (Select the best answer below.) A. The calculations toll you that this project's IRR is negative. B. The calculations tell you this project has more than one RRR. C. The calculations tell you this project's IRR is greater than 50%. D. The calculations tell you this projoct has no IRR. The IRR rule tells managers to invest if a project's IRR is greater than the cost of capital. If Acme Oseillators' cost of capital is 8%, should the company acoept or rojoct this investment? (Seloct the best answor bolow.) A. The IRR rule says that the firm should accept the investment if the IRR is less than the cost of capital. However, in cases with multiple IRRs, one IRR may be greater than the cost of capital, while another is lower. In such a situation, it is not clear whether to accept or reject the project. B. The IRR nule says that the firm should accept the irvestment if the IRR exceeds the cost of capital. However, in cases with muliple IRRs, one IRR may be greater than the cost of capital, while another is lower. In such a situation, it is not cear whether to accept or reject the project. C. The IRR rule says that the firm should accopt the investment if the IRR exceeds the cost of capital. However, in cases with multiple IRRs, one IRR may be greater than the cost of capital, while another is lower. In such a situation, the project should always be accepted. D. The IRR rule says that the firm should accept the investment if the IRR exceeds the NPV. However, in cases with multiple IRRs, one IRR may be greater than the cost of captal, while another is lower, In such a situation, the project should be accepted if the NPV is greater than 0 . c. Notice that this project's greatest NPVs come at very high discount rates. Can you provide an intuitive explanation for that pattern? (Select the best answer below.) A. The largest cash outfiow ($601,900,000) occurs in year 3 . Other things equal, a change in the discount rate will have a larger impact on present value when the outliow of inflow occurs further into the future. B. With a 50% discount rate, for example, the present value of the $601,900,000 outfiow is only $178,340,741 (29,6\% of the undiscounted outflow). In contrast, with a 5% disoount rate, present value is $519,943,851 ( 86.4% of the undiscounted outlow). C. There is no intuitive explanation when there are muliple tRRs. D. A and B provide an intuitive explanation. d. If Acme Oscillators cost of capital is 8%, the MiRR of the investment is \%. (Round to four decimal places.) The company should the investment because its MRR is than the cost of capital (Select from the drop-down menus.) Problems with the IRR method Acme Oscillators is considering an investment project that has the following rather unusual cash flow pattern: a. Calculate the project's NPV at each of the following discount rates: 0%,5%,10%,20%,30%,40%,50%. b. What do the calculations tell you about this projec's IRR? The IRR fule tells managers to invest if a project's IRR is greater than the cost of capitat, It Acme Oscillators' cost of capital is 8%, should the company accept or reject this investment? c. Notice that this project's greatest NPVs come at very high discount rates. Can you provide an intuitive explanation for that pattern? d. If Acme Oscillators' cost of capital is 8%, should the company accept or reject this investme0t based on MIRR? a. Calculate the NPV at the following discount rates for this investment: 0%,5%,10%,20%,30%,40%,50%. The NPV at 0% is $. (Round to the nearest dollar.) The NPV at 5% is $. (Round to the nearest dollar.) The NPV at 10% is $. (Round to the nearest dollar.) The NPV at 20% is \$. (Round to the nearest dollar.) The NPV at 30% is $. (Round to the nearest dollar.) The NPV at 40% is $. (Round to the nearest dollar.) The NPV at 50% is $. (Round to the nearest dollar.) b. What do the calculations tell you about this project's IRR? (Select the best answer below.) A. The calculations toll you that this project's IRR is negative. B. The calculations tell you this project has more than one RRR. C. The calculations tell you this project's IRR is greater than 50%. D. The calculations tell you this projoct has no IRR. The IRR rule tells managers to invest if a project's IRR is greater than the cost of capital. If Acme Oseillators' cost of capital is 8%, should the company acoept or rojoct this investment? (Seloct the best answor bolow.) A. The IRR rule says that the firm should accept the investment if the IRR is less than the cost of capital. However, in cases with multiple IRRs, one IRR may be greater than the cost of capital, while another is lower. In such a situation, it is not clear whether to accept or reject the project. B. The IRR nule says that the firm should accept the irvestment if the IRR exceeds the cost of capital. However, in cases with muliple IRRs, one IRR may be greater than the cost of capital, while another is lower. In such a situation, it is not cear whether to accept or reject the project. C. The IRR rule says that the firm should accopt the investment if the IRR exceeds the cost of capital. However, in cases with multiple IRRs, one IRR may be greater than the cost of capital, while another is lower. In such a situation, the project should always be accepted. D. The IRR rule says that the firm should accept the investment if the IRR exceeds the NPV. However, in cases with multiple IRRs, one IRR may be greater than the cost of captal, while another is lower, In such a situation, the project should be accepted if the NPV is greater than 0 . c. Notice that this project's greatest NPVs come at very high discount rates. Can you provide an intuitive explanation for that pattern? (Select the best answer below.) A. The largest cash outfiow ($601,900,000) occurs in year 3 . Other things equal, a change in the discount rate will have a larger impact on present value when the outliow of inflow occurs further into the future. B. With a 50% discount rate, for example, the present value of the $601,900,000 outfiow is only $178,340,741 (29,6\% of the undiscounted outflow). In contrast, with a 5% disoount rate, present value is $519,943,851 ( 86.4% of the undiscounted outlow). C. There is no intuitive explanation when there are muliple tRRs. D. A and B provide an intuitive explanation. d. If Acme Oscillators cost of capital is 8%, the MiRR of the investment is \%. (Round to four decimal places.) The company should the investment because its MRR is than the cost of capital (Select from the drop-down menus.)