c) d) Which project(s) would you select if you used the IRR methods. Why? If these were mutually exclusive projects, what is the cross-over rate for these two projects? Explain the significance of this rate. Explain to Grandma the problem of multiple rates of returns under the IRR method? Under what conditions will you have multiple IRRS? e)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Year
A
В
-400,000
55,000
55,000
55,000
225,000
225,000
-600,000
300,000
300,000
50,000
50,000
50,000
1
2
3
4
5
The discount rate is 10%. These are independent projects.
How long does each project take to payback on a nominal basis? What about on a discounted basis?
Which project(s) would you select if you used the NPV method? Why?
Which project(s) would you select if you used the IRR methods. Why?
If these were mutually exclusive projects, what is the cross-over rate for these two projects? Explain the
significance of this rate.
Explain to Grandma the problem of multiple rates of returns under the IRR method? Under what conditions
will you have multiple IRRS?
а)
e)
2.
Transcribed Image Text:Year A В -400,000 55,000 55,000 55,000 225,000 225,000 -600,000 300,000 300,000 50,000 50,000 50,000 1 2 3 4 5 The discount rate is 10%. These are independent projects. How long does each project take to payback on a nominal basis? What about on a discounted basis? Which project(s) would you select if you used the NPV method? Why? Which project(s) would you select if you used the IRR methods. Why? If these were mutually exclusive projects, what is the cross-over rate for these two projects? Explain the significance of this rate. Explain to Grandma the problem of multiple rates of returns under the IRR method? Under what conditions will you have multiple IRRS? а) e) 2.
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