None 16. You are evaluating the following project:YearCash Flow0-$1,0001$2,4202-$1,456Suppose the cost of capital is 20%. Which of the following statements are accurate about making the investmentdecision?1. Since the NPV is positive (=$5.56), you should accept the project.II. Since the IRR (=12%) is less than the cost of capital, you should reject the project.III. There are two solutions to the IRR for this project.O I, II and IIIOI and IIIOI and IIO Only I

**Project Cash Flows:**Year | Cash Flow------- | --------0 | -$1,000 (Initial Investment)1 | $2,4202…

Answered: 16. You are evaluating the following…

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

Section: Chapter Questions

Problem 1PS

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10. An engineer is comparing three projects with the Incremental ROR method. There are revenue forecasts and cost cash flows. He uses Excel's IRR function to determine the ROR value for each project. Alternative A is 3.5% above MARR, Alternative B is 1.2% below MARR, and Alternative C = 2.4% above MARR. Which alternatives should be included in the incremental ROR analysis? A. He must include alternatives A and C in the Incremental analysis B. He must include alternatives A and B in the Incremental analysis C. He must include alternatives B and C in the Incremental analysis D. Only alternative A should be included in the incremental analysis Please solve max only answer option ASAP in 10 minutes
Project X has the following cash flows: C0 = -1,250, C1 = 750, and C2 = 900. If the IRR of the project is 20 percent and if the cost of capital is 25 percent, you would need more information accept the project reject the project be indifferent
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. Net Present Value 150,000 100,000 50,000 0% 10% 20% 30% 40% (50,000) (100,000) Cost of Capital I 50%
Suppose your firm is evaluating four potential new investments. You calculate that these projects, W, X, Y, and Z,have the NPV and IRR figures given below:Project W: NPV = $7,000 IRR = 13%Project X: NPV = $-4,000 IRR = 15%Project Y: NPV = $5,000 IRR = 10%Project Z: NPV = $800 IRR = 18%a) Which project(s) should be accepted if they are independent? Clearly explain your reasoning.b) Which project(s) should be accepted if they are mutually exclusive? Clearly explain your reasoning.
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