Remember when doing NPV & IRR, use my in$-$class assignment as a guide and utilize the PVA table

when applicable. This will be different than the method in Chapter $11,$ but will save you time.

Cerritos Company can invest in each of three cheese$-$making projects: C$1,$ C$2,$ and C$3.$ Each

project requires an initial investment of $$438,374$ and would yield the following annual

cash flows.

A$-$ Assuming that the company requires a $12\%$ return from its investments, use net present

value to determine which projects, if any, should be acquired.

B$-$ Using the answer from part $1,$ explain whether the internal rate of return is higher or

lower than $12\%$ for project C$2.$

C$-$ Compute the internal rate of return for project C$2$

Hint: Notice that C$2$ is really the only project that pays off in equal annual amounts.

To get the PV of the amounts, use the PV of $$1$ table for $C1$ and $C3.$ Calculate each

three times. For instance on C$1,$ get the PV of $$1$ for $$24000$ for the $n$ of $1$ and then

get the PV of $$1$ for $$216,000$ for the $n$ of $2$ and then get the PV of $$1$ for $$336,000$ for

the $n$ of $3.$ Add each year up for the total PV$.$ Do the same for C$3.$ For C$2,$ you can

use the PVA table with an $n$ of $3.$