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You have 3 projects with the following cash flows: (Click on the following icon o in order to copy its contents into a spreadsheet) Year 1 2 3 4 Project 1 Project 2 Project 3 -$151 - 827 21 $21 $40 $59 $81 7,008 80 -6,502 -243 40 59 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| V Unless all of the V cash flows of the project precede the V 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 S (Round to the nearest cent.) The NPV for project 1 for a cost of capital of 20% is S (Round to the nearest cent) The NPV for project 1 for a cost of capital of 50% is S (Round to the nearest cent) The NPV for project 2 for a cost of capital of 5% is s (Round to the nearest cent) The NPV for project 2 for a cost of capital of 20% is. (Round to the nearest cent.) The NPV for project 2 for a cost of capital of 50% is S (Round to the nearest cent) The NPV for project 3 for a cost of capital of 5% is S. (Round to the nearest cent) The NPV for project 3 for a cost of capital of 20% is S (Round to the nearest cent)

You have 3 projects with the following cash flows: (Click on the following icon o in order to copy its contents into a spreadsheet) Year 1 2 3 4 Project 1 Project 2 Project 3 -$151 - 827 21 $21 $40 $59 $81 7,008 80 -6,502 -243 40 59 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| V Unless all of the V cash flows of the project precede the V 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 S (Round to the nearest cent.) The NPV for project 1 for a cost of capital of 20% is S (Round to the nearest cent) The NPV for project 1 for a cost of capital of 50% is S (Round to the nearest cent) The NPV for project 2 for a cost of capital of 5% is s (Round to the nearest cent) The NPV for project 2 for a cost of capital of 20% is. (Round to the nearest cent.) The NPV for project 2 for a cost of capital of 50% is S (Round to the nearest cent) The NPV for project 3 for a cost of capital of 5% is S. (Round to the nearest cent) The NPV for project 3 for a cost of capital of 20% is S (Round to the nearest cent)

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 21P
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You have 3 projects with the following cash flows: (Click on the following icon in order to copy its contents into a spreadsheet.) Year 1 4 Project 1 Project 2 Project 3 - $151 $21 $40 $59 $81 - 827 7,008 - 6,502 21 40 59 80 - 243 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 V. Unless all of the cash flows of the project precede the 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 S (Round to the nearest cent.) The NPV for project 1 for a cost of capital of 20% is $ (Round to the nearest cent.) The NPV for project 1 for a cost of capital of 50% is S (Round to the nearest cent.) The NPV for project 2 for a cost of capital of 5% is S (Round to the nearest cent.) The NPV for project 2 for a cost of capital of 20% is. (Round to the nearest cent.) The NPV for project 2 for a cost of capital of 50% is $ (Round to the nearest cent.) The NPV for project 3 for a cost of capital of 5% is S. (Round to the nearest cent.) The NPV for project 3 for a cost of capital of 20% is $ (Round to the nearest cent.)
Transcribed Image Text:You have 3 projects with the following cash flows: (Click on the following icon in order to copy its contents into a spreadsheet.) Year 1 4 Project 1 Project 2 Project 3 - $151 $21 $40 $59 $81 - 827 7,008 - 6,502 21 40 59 80 - 243 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 V. Unless all of the cash flows of the project precede the 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 S (Round to the nearest cent.) The NPV for project 1 for a cost of capital of 20% is $ (Round to the nearest cent.) The NPV for project 1 for a cost of capital of 50% is S (Round to the nearest cent.) The NPV for project 2 for a cost of capital of 5% is S (Round to the nearest cent.) The NPV for project 2 for a cost of capital of 20% is. (Round to the nearest cent.) The NPV for project 2 for a cost of capital of 50% is $ (Round to the nearest cent.) The NPV for project 3 for a cost of capital of 5% is S. (Round to the nearest cent.) The NPV for project 3 for a cost of capital of 20% is $ (Round to the nearest cent.)
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