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Unformatted text preview: , =- , 16 000 PV inflows 10 000 = , PV inflows 26 000 So: = ( ) ( )= , , = . PI PV inflows PV outflows 26 00010 000 2 6 3) If a project has an IRR that is equal to the discount rate, the NPV for the project is: a) Neither here nor there b) Either positive or negative c) Negative d) Zero e) Positive 4) The Green Thumb Landscaping Company can purchase equipment on sale for $3200. The asset has a two-year life, and will produce $800 in the first year, and $3000 in the second year. The cost of capital is 15%. Should this project be accepted? a) b) No c) Yes d) Maybe so e) I dont know Using either the NPV or the IRR will provide the same decision: NPV = -235.92 IRR = 10.13% 5) The factors that cause problems with the use of IRR in projects that are mutually exclusive are: a) Scale and reversing flow problems b) Timing and scale problems c) The differential equations problem d) The IRR complexity problem and the scale problem...
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This note was uploaded on 02/17/2011 for the course FIN 3604 taught by Professor Patterson during the Spring '10 term at University of South Florida - Tampa.
- Spring '10
- Corporate Finance