Chapter 8 Finance Study Guide - FIN 335 Dr N Richie Chapter 8 Study Guide 1 Calculate and interpret the net present value(NPV internal rate of

# Chapter 8 Finance Study Guide - FIN 335 Dr N Richie Chapter...

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FIN 335 Dr. N. Richie Chapter 8 Study Guide 1.Calculate and interpret the net present value (NPV), internal rate of return (IRR), average accounting return (AAR), and payback rule. 2.Choose a project by applying the NPV, IRR, Payback rule, and average accounting return3.List the benefits and limitations of the four decision rules above.4.Identify mutually exclusive projects and projects with non-conventional cash flows Please note : you are not responsible for the Profitability Index (PI) or the Modified IRR (MIRR) that are covered in the book. Extra Practice Problems 1.You are looking at a new project and you have estimated the following cash flows:Year 0:CF = -165,000Year 1:CF = 63,120; NI = 13,620Year 2:CF = 70,800; NI = 3,300Year 3:CF = 91,080; NI = 29,100Average Book Value = 72,000Your required return for assets of this risk is 12%.What is the NPV? Should you accept the project?