Question 5: (3 Points)

a) (1 Point) Project X has the following cash flows: C0 = +2,000, C1 = -1,150, and C2 = -1,150. If the IRR of the project is 9.85 percent and if the cost of capital is 12.00 percent, would you accept or reject the project? Explain your answer.

b) (1 Point) If an investment project has an IRR equal to the cost of capital, would you accept or reject the project? Explain your answer.

c) (1 Point) State two disadvantages of using the IRR method?