1. A company estimates that its required rate of return is 18 percent on its capital investments. It is considering the following independent projects. Select all that are true.
It should accept Project C, which requires an initial investment of $1,000,000 and generates an IRR of 19 percent.
Project F, which has $439 NPV, must have an IRR that is higher than 18%.
It should accept Project A, which requires an initial investment of $145,000 and has a NPV of $18.
It should reject Project E, which has an IRR of 18.5 percent with a payback of 11 years.
It should accept Project B, which has an IRR of 16.5 percent.
It should accept Project D, which requires an initial investment of $1,250,000 and generates a payback of 4.5 years.
2. A firm evaluates all of its projects by applying the IRR rule. The cash flows for a project is shown below and the firm requires 15% return on this type of project. First, compute the IRR of the project in box 1. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)) Then, make the investment decision based on the IRR by inputing either "accept" or "reject" in box 2.
Year Cash Flow
0 $36,500
1 21,000
2 17,000
3 7,000