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In: Finance

Year 0 1 2 3 4 Project 1 −$152 $19 $42 $58 $82 Project 2                            &nb

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%​?

Solutions

Expert Solution

Answer:

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jeff jeffy answered 1 year ago
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