Question: Year 0 1 2 3 4 Project 1 $152 $19 $42 $58 $82 Project 2 827 0 0 6,992 6,490 Project 3 20 38 62

Year	0	1	2	3	4
Project 1	$152	$19	$42	$58	$82
Project 2	827	0	0	6,992	6,490
Project 3	20	38	62	82	246

a. For which of these projects is the IRR rule reliable?

The IRR rule is reliable for (project 2 /project 3 /project 1) Unless all of the (positive/negative) cash flows of the project precede the (positive/negative)

ones, the IRR rule may give the wrong answer and should not be used. Furthermore, there may be multiple IRRs or the IRR may not exist.

b. Estimate the IRR for each project (to the nearest

1%).

c. What is the NPV of each project if the cost of capital is

5%?

20%?

50%?

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