Consider the two mutually exclusive investment projects given in the table below for which MARR = 15%. On the basis of the IRR criterion, which project would be selected under an infinite planning horizon with project repeatability likely? E Click the icon to view the cash flows for the investment projects. The rate of return on the incremental investment is 12.4 %. (Round to one decimal place.) - X More Info Net Cash Flow Project A Project B - $9,500 7,000 7,000 - $4,000 2,000 3,000 1 2 3 3,000 40.96% IRR 30.25%

Problem 9-25 Fudge factors An oil company executive is considering investing $10.1 million in one or both of two wells: well 1 is expected to produce oil worth $3.01 million a year for 10 years; well 2 is expected to produce $2.01 million for 15 years. These are real (inflation-adjusted) cash flows. The beta for producing wells is 0.91. The market risk premium is 9%, the nominal risk-free interest rate is 7%, and expected inflation is 3%. The two wells are intended to develop a previously discovered oil field. Unfortunately there is still a 21% chance of a dry hole in each case. A dry hole means zero cash flows and a complete loss of the $10.1 million investment. Ignore taxes and make further assumptions as necessary. a. What is the correct real discount rate for cash flows from developed wells? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Real discount rate b. The oil company executive proposes to add 20 percentage points to the…

A. For what values of x is f(x) NOT y 00 6 4 2 X -3-2-10 1 2 3 4 5

Answer Question 4