Question: Question 1. Your assistant has computed the following for a five year project that has conventional cash flows and a required return of 15%: PI
Question 1. Your assistant has computed the following for a five year project that has conventional cash flows and a required return of 15%: PI = 1.09, NPV = $89, IRR = 18.7%, Discounted Payback (DPB) = 5 years, AAR = 19.6%. Which of these must have been computed wrong?
Question 2. The following cash flows relate to two mutually exclusive investments. The required return on these investments is 10%. What decision should the firm make?
| Project | Year 0 | Year 1 | Year 2 |
| Project A | -$1,200 | $1,000 | $500 |
| Project B | -$2,800 | $1,500 | $1,900 |
Accept Project A only
Accept Project B only
Accept Both projects A and B
Accept Neither project A nor B
Question 3. The following cash flows relate to two independent investments. The required return on these investments is 13%. What decision should the firm make?
| Project | Year 0 | Year 1 | Year 2 |
| Project A | -$1,200 | $1,000 | $500 |
| Project B | -$2,800 | $1,500 | $1,900 |
Accept Project A only
Accept Project B only
Accept Both projects A and B
Accept Neither project A nor B
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