Question

You have 3 projects with the following cash​ flows:

Year	0	1	2	3	4
Project 1	−$151	$ 21	$ 39	$ 59	$ 80
Project 2	−824	00	00	6,999	−6,501
Project 3	2020	40	62	81	−245

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

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%​?

a. For which of these projects is the IRR rule​ reliable?  ​(Select from the​ drop-down menus.)

The IRR rule is reliable for

project 1

. Unless all of the

negative

cash flows of the project precede the

positive

​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%​).

The IRR for project 1 is?

​(Round to the nearest​ integer.)The IRR for project 2 is?

​(Round to the nearest​ integer.)The IRR for project 3 is?

​(Round to the nearest​ integer.)c. What is the NPV of each project if the cost of capital is

5%​?

20%​?

50 %?

The NPV for project 1 for a cost of capital of

5 %

is

​$nothing.

​(Round to the nearest​ cent.)The NPV for project 1 for a cost of capital of

20 %

is

​$nothing.

​(Round to the nearest​ cent.)The NPV for project 1 for a cost of capital of

50 %

is

​$nothing.

​(Round to the nearest​ cent.)The NPV for project 2 for a cost of capital of

5 %

is

​$nothing.

​(Round to the nearest​ cent.)The NPV for project 2 for a cost of capital of

20 %

is

nothing.

​(Round to the nearest​ cent.)The NPV for project 2 for a cost of capital of

50 %

is

​$nothing.

​(Round to the nearest​ cent.)The NPV for project 3 for a cost of capital of

5 %

is

​$nothing.

​(Round to the nearest​ cent.)The NPV for project 3 for a cost of capital of

20 %

is

​$nothing.

​(Round to the nearest​ cent.)The NPV for project 3 for a cost of capital of

50 %

is

​$nothing.

​(Round to the nearest​ cent.)

Answer 1

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