Question

 LO 3 LO 4 7.

Calculating NPV and IRR. A project that provides annual cash flows of $2,620 for eight years costs $9,430 today. Is this a good project if the required return is 8 percent? What if it's 24 percent? At what discount rate would you be indifferent between accepting the project and rejecting it?

 LO 4 9.

Calculating NPV. For the cash flows in the previous problem, what is the NPV at a discount rate of 0 percent? What if the discount rate is 10 percent? If it is 20 percent? If it is 30 percent?

 LO 1 LO 3 19.

Payback Period and IRR. Suppose you have a project with a payback period exactly equal to the life of the project. What do you know about the IRR of the project? Suppose that the payback period is never. What do you know about the IRR of the project now?

 LO 5 23.

MIRR. Suppose the company in the previous problem uses a discount rate of 11 percent and a reinvestment rate of 8 percent on all of its projects. Calculate the MIRR of the project using all three methods with these rates.

Answer 1

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