Kyle is considering an investment with the following cash flows: Net Cash Flow Year ($250,000) 2,250,000 (2,550,000) 3 350,000 Which of the following statements is most correct? (Hint: Create a simple NPV profile.) A. If you consider only the relevant range for a firm's cost of capital, this project would not be accepted. 0 1 2 B. The project has two IRRS (14.204334 percent and 669.872604 percent) so the project should be accepted if the firm's cost of capital is between 14.204334 percent and 669.872604 percent. C. The project has two IRRS (14.204334 percent and 356.687931 percent) so the project should be accepted if the firm's cost of capital is less than 14.204334 percent or greater than 356.687931 percent. D. No IRR can be calculated for this project. E. This project has multiple MIRRS.

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…

Answer Question 4

What about requirement 4+5