6. The following graph shows the NPV of a project as a function of the cost of capital. Your actual cost of capital is 12%. a. What is the IRR of the project? b. Should you take the project? Explain. 150,000 T

3. Project A and Project B are mutually exclusive. Project A has an IRR of 22.5 and Project B has an IRR of 30.8. The two projects happen to have equal net present value at a discount rate of 16.25%. The firms cost of capital is 12 percent. Explain with a graph, which project creates more value and which project should be chosen.

When calculating the annual rate of return, the average investment is equal to initial investment divided by life of project. (initial investment plus $0) divided by 2. (initial investment plus salvage value) divided by 2. initial investment divided by 2.

How does the net working capital affect the NPV of a 5-year project if working capital is expected to increase by $25,000 in to (and decrease in t5 again by the same amount) and the firm has a 15% cost of capital?

Profitability index. Given the discount rate and the future cash flow of each project listed in the following table, , use the PI to determine which projects the company should accept. ..... What is the Pl of project A? (Round to two decimal places.)

Discuss in full detail, if you can borrow all the money you need for a project at 6 percent, doesn’t it follow that 7 percent is your cost of capital for the project?

7

A project has the following cash flow n 0 1 2 3 Cash flow -25,000 0 X X What is the value of X that will result in 15% rate of return?

A project requires an investment of 4 at times o and 6. It has a single positive cash flow of 12 at time 3. What is the (positive) Internal Rate of Return on this project? A B C D E 0.09 0.11 0.23 0.38 0.50

You have an opportunity to invest $104,000 now in return for $79,100 in one year and $30,100 in two years. If your cost of capital is 9.3%, what is the NPV of this investment?