USING EXCEL

a$.$ The CEO first notices that he could always turn multiple negative cash flows into a single

negative cash flow by adding all the negative cash flows together today, getting that much

money at time $0,$ and just holding onto it until he needs to make the payments. Calculate

the IRR of the above cash flow stream if all the negative cash flows are moved to year $0.$

$(10$ points

b$.$The CEO also knows that he doesn$$t have to just $$hold on$$ to the money at time $0,$ he can

find a temporary fund to invest it and then withdraw money to pay for the negative cash

flows. However, he$$s not sure how well his investment will have to do to make the whole

plan worthwhile. If the minimum attractive interest rate for the company is $10\%,$ calculate

what the temporary fund$$s interest rate $($annual effective$)$ will have to be$.($i$.$e$.$ what fund

interest rate makes the overall project have an IRR of $10\%)(10$ points$)$c$.$ With the assumptions below, think about what happens to $$1$ after multiple periods of

investing have passed.

$1)$ IRR

$2)-100\%$ IRR

$3)0\%$ IRR

a$.$ Which of the statement$($s$)$ above are real and why? $($There may be more than $1)$

$(5$ points$)$ State weather the statement would result in an increase or decrease in

the investment.

b$.$ Which of the statements above are not real and why? $($There may be more than

$1)(5$ points$)$