QUESTION 38 Your boss asks you to take a look at a project (below) with cash...
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QUESTION 38 Your boss asks you to take a look at a project (below) with cash flows going out at year 0 and then cash flows expected to come back to the company. They tell you the required rate of return on projects of this risk class is 20 percent. Use the IRR decision to evaluate this project; should it be accepted or rejected? Time Cash Flow 0 1 -$5.000 $1.200 2 $1.400 a. IRR = 16.92 percent; accept the project b. IRR = 18.32 percent; accept the project OC. IRR = 18.32 percent; reject the project O d. IRR = 7.59 percent; reject the project 3 $1.600 4 $1,600 5 $1.100 6 $2.000 QUESTION 37 A project costs $100,000 today and is expected to generate cash flows of $12,000 per year for the next 20 years. The appropriate discount rate for these cash flow is 6%. Using NPV, should this project be accepted, and why? a. Yes, the project should be accepted since it has a NPV = $16,999.62. O b. Yes, the project should be accepted since it has a NPV = $37,639.05. OC. Yes, the project should be accepted since it has a NPV = $15,391.23. O d. None of these answers are correct. QUESTION 38 Your boss asks you to take a look at a project (below) with cash flows going out at year 0 and then cash flows expected to come back to the company. They tell you the required rate of return on projects of this risk class is 20 percent. Use the IRR decision to evaluate this project; should it be accepted or rejected? Time Cash Flow 0 1 -$5.000 $1.200 2 $1.400 a. IRR = 16.92 percent; accept the project b. IRR = 18.32 percent; accept the project OC. IRR = 18.32 percent; reject the project O d. IRR = 7.59 percent; reject the project 3 $1.600 4 $1,600 5 $1.100 6 $2.000 QUESTION 37 A project costs $100,000 today and is expected to generate cash flows of $12,000 per year for the next 20 years. The appropriate discount rate for these cash flow is 6%. Using NPV, should this project be accepted, and why? a. Yes, the project should be accepted since it has a NPV = $16,999.62. O b. Yes, the project should be accepted since it has a NPV = $37,639.05. OC. Yes, the project should be accepted since it has a NPV = $15,391.23. O d. None of these answers are correct.
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