Reference no: EM133122511
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%.
|
Project
|
Initial investment
|
Year 1 Cash Flow
|
Year 2 Cash Flow
|
Year 3 Cash Flow
|
Year 4 Cash Flow
|
Year 5 Cash Flow
|
|
A
|
$1,000,000
|
300,000
|
300,000
|
400,000
|
400,000
|
0
|
|
B
|
$1,450,000
|
500,000
|
500,000
|
500,000
|
500,000
|
0
|
|
C
|
$2,500,000
|
750,000
|
0
|
0
|
1,000,000
|
3,000,000
|
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.