Question

QUESTION 20

1. For this and the next 3 questions. Consider the following MUTUALLY EXCLUSIVE projects. Cost of capital is 10%. Calculate IRR.

   Year	Project A	Project B
   0	-40,000	-20,000
   1	8,000	7,000
   2	14,000	13,000
   3	13,000	12,000
   4	12,000
   5	11,000
   6	10,000

   		IRR (A) = 17.47%. IRR(B) = 25.20%
   		IRR (A) = 17.77%. IRR(B) = 25.20%
   		IRR (A) = 17.47%. IRR(B) = 20%
   		None of the above is completely correct

1 points   

QUESTION 21

1. Calculate NPV

   		NPV(A) = 2,131.01. NPV(B) = 2,462.24
   		NPV(A) = 9,281.10. NPV(B) = 6,057.45
   		NPV(A) = 9,281.10. NPV(B) = 6,123.22
   		None of the above is completely correct

1 points   

QUESTION 22

1. Calculate the equivalent annual annuity (EAA).

   		EAA (A) = 2,131.01. EAA (B) = 2,462.24
   		EAA(A) = 9,281.10. EAA (B) = 6,057.45
   		EAA(A) = 9,281.10. EAA (B) = 6,123.22
   		None of the above is completely correct

1 points   

QUESTION 23

1. Which project should be chosen and why?

   		Project A; it has a higher EAA
   		Project B; it has a higher EAA
   		Both projects are equally acceptable

Answer 1