Reference no: EM133122044
1. If you obtain a cost-saving technology for $25,631, you will save $946 in year 1, and the saving will grow at a 4% constant rate forever. The IRR of this investment is ____%
2. Suppose that the annual real interest rate is 8% and the annual inflation rate is 5%. The present value of a $331 nominal cash flow in 4 years is $______.
3. Given the information in the table below, which of the following statements is true? Assume the cost of capital is 15%.
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Project
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Initial investment
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Year 1 Cash Flow
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Year 2 Cash Flow
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Year 3 Cash Flow
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Year 4 Cash Flow
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Year 5 Cash Flow
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A
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$1,000,000
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300,000
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300,000
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400,000
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400,000
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0
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B
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$1,450,000
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500,000
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500,000
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500,000
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500,000
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0
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C
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$2,500,000
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750,000
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0
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0
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1,000,000
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3,000,000
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Group of answer choices
If these projects are independent, only project C should be accepted.
If these projects are independent, all three projects should be accepted.
Project B has the highest IRR.
If these projects are mutually exclusive, only project B should be accepted.
Project A has the longest payback period.
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