1. What is the approximate IRR for the cash flow curve depicted?a. 5%b. 10%C. 15%d. 20%-Select- v2. When the cost of capital is less than a project's IRR, the NPV for the project isa. negativeb. equals the project's IRRC. positived. cannot be determined-Select- v3. If the cost of capital increases, the NPV for the projecta. increasesb. stays the sameC. decreasesd. cannot be determined-Select-4. In the unrealistic situion in which the cost of capital were zero, the NPV of the projecta. is the sum of the cash flowsb. is the upper limit for the NPV of the projectc. both of the above statements are correctd. neither of the first two statements is correct-Selecte to search Exploring FinariceCost or Capital with Dereasing Casn FlowThis graph shows the net present value of an investment with annual cash flows of -$1,000, $500, $400, $300, and $100 as a function of different costs of capital (interest %). Note that this cash flow returns declining amounts after theinitial investment. Drag left or right on the graph to move the cursors to see the net present value (NPV) for different costs of capital. The point where the curve crosses the X-axis determines the internal rate of return (IRR). (Note: due tolimited pixel resolution, it is sometimes difficult to get to that precise point.)NPV = CFo+E=tCF$500(1+0,1000)!T (1+0, 1000)? + (1+0. 1000 + T+0 1000y4 = $78.82=-$1, 000 +$400$300NPV ($)500-400 -300200-100-78.821010-100-Cost of Capital (%)Created by Gary H. McClelland, Professor Emeritus University of Colorado BoulderO Cengage Learning. All Rights Reserved.9:41 PM80°Fe to search8/10/2021lyp

Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% C. 15% d. 20% -Select- V 2. When the cost of capital is less than a project's IRR, the NPV for the project is a. negative b. equals the project's IRR C. positive d. cannot be determined -Select- v 3. If the cost of capital increases, the NPV for the project a. increases b. stays the same C. decreases d. cannot be determined Select- v

1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% C. 15% d. 20% -Select- V 2. When the cost of capital is less than a project's IRR, the NPV for the project is a. negative b. equals the project's IRR C. positive d. cannot be determined -Select- v 3. If the cost of capital increases, the NPV for the project a. increases b. stays the same C. decreases d. cannot be determined Select- v

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8TP: Fenton, Inc., has established a new strategic plan that calls for new capital investment. The...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

1. What is the approximate IRR for the cash flow curve depicted?
a. 5%
b. 10%
C. 15%
d. 20%
-Select- v
2. When the cost of capital is less than a project's IRR, the NPV for the project is
a. negative
b. equals the project's IRR
C. positive
d. cannot be determined
-Select- v
3. If the cost of capital increases, the NPV for the project
a. increases
b. stays the same
C. decreases
d. cannot be determined
-Select-
4. In the unrealistic situion in which the cost of capital were zero, the NPV of the project
a. is the sum of the cash flows
b. is the upper limit for the NPV of the project
c. both of the above statements are correct
d. neither of the first two statements is correct
-Select
e to search

Exploring Finarice
Cost or Capital with Dereasing Casn Flow
This graph shows the net present value of an investment with annual cash flows of -$1,000, $500, $400, $300, and $100 as a function of different costs of capital (interest %). Note that this cash flow returns declining amounts after the
initial investment. Drag left or right on the graph to move the cursors to see the net present value (NPV) for different costs of capital. The point where the curve crosses the X-axis determines the internal rate of return (IRR). (Note: due to
limited pixel resolution, it is sometimes difficult to get to that precise point.)
NPV = CFo+E=t
CF
$500
(1+0,1000)!T (1+0, 1000)? + (1+0. 1000 + T+0 1000y4 = $78.82
=-$1, 000 +
$400
$300
NPV ($)
500-
400 -
300
200-
100-
78.82
10
10
-100-
Cost of Capital (%)
Created by Gary H. McClelland, Professor Emeritus University of Colorado Boulder
O Cengage Learning. All Rights Reserved.
9:41 PM
80°F
e to search
8/10/2021
lyp

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