You would like to invest in the following project. Year __________________Year Cash Flow 0.........................................$55,000 1.........................................$30,000 2.........................................$37,000 Camille,

Question:

You would like to invest in the following project.

Year __________________Year Cash Flow

0.........................................$55,000

1.........................................$30,000

2.........................................$37,000

Camille, your boss, insists that only projects that can return at least $1.10 in today's dollars for every $1 invested can be accepted. She also insists on applying a 10% discount rate to all cash flows. Based on these criteria, you should:

a) Accept the project because it returns almost $1.22 for every $1 invested.

b) Accept the project because it has a positive PI.

c) Accept the project because the NPV is $2,851.

d) Reject the project because the PI is 1.05.

e) Reject the project because the IRR exceeds 10%.

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...