Incremental cash flow amount to use as initial investment

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Reference no: EM131352811

1. One investment opportunity should be rejected if its NPV is ________ and its IRR is ________.

a. Positive; Positive.

b. Positive; Greater than the required return.

c. Negative; Negative.

d. Negative; Smaller than the required return.

e. Negative; Greater than the required return.

2. Darth Vader, Inc. is looking at setting up a new manufacturing plant in Death Star to produce TIE fighters. The company bought some land a decade ago for $40 billion. The land was appraised recently for $30 billion. Darth Vader wants to build the new plant on this land; the plant will cost $50 billion to build, and the site requires $3 billion worth of grading before it is suitable for construction. What should be the proper “incremental cash flow” amount to use as the initial investment (CF0)?

a. $43 billion.

b. $60 billion.

c. $63 billion.

d. $83 billion.

e. $93 billion.

Reference no: EM131352811

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