3090 HW5 answers - Finance 3090 HW5 Name 1 If you are...

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Finance 3090, HW5 Name: __________________________ 1. If you are evaluating a normal, independent project, then you should accept the project as long as ____________. a) The IRR is positive b) The Payback Period exists c) The Modified IRR is greater than the IRR d) The Discounted Payback Period exists Use the following information for questions 2 and 3: Project S has cash flows of (600), 400, 300. Project L has cash flows of (900), 300, 400, 500. Both projects have a required return of 8%. The projects are mutually exclusive and repeatable. 2. What is the Equivalent Annual Annuity of Project S? CF0 = -600, C01 = 400, C02 = 300; I = 8 NPV = 27.572 N=2, I/Y = 8, PV = -27.572, FV = 0 PMT = 15.46 3. What is the 6-yr NPV of Project L using the Replacement Chain approach? CF0 = -900, C01 = 300, C02 = 400, C03 = -400, C04=300, C05 = 400, C06 = 500; I = 8 NPV = 211 4. Net Present Value is considered a better method than Internal Rate of Return because __________. 5. Which of the following is true for normal projects if the WACC is positive? a) If a project's IRR is positive, then its NPV will always be positive b) If a project's NPV is negative, then its Profitability Index will always be negative c) If a project's NPV is positive, then its IRR will always be positive d) None of the above are true
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