QUESTION 9
FOR THIS AND THE NEXT 2 QUESTIONS. Consider the following set of cash flows. Cost of capital is 13%. What is your capital budgeting decision?
Year
Cash Flow
0
-30
1
16
2
-25
3
49
A. Accept the project. IRR is 10.93%
B. Accept the project. NPV is positive
C. Reject project. NPV is -$1.46
D. Reject project IRR 8.51%
E. None of the above
QUESTION 10
Consider the above project. What can you say about the IRR?
A. Because the project's cash flows are non-normal, there is multiple IRRs
B. Although the project's cash flows are non-normal, there is only one IRR
C. There is no economic interpretation of the project's IRR since cash flows are non-normal
D. Uncertain outcome. Unable to make a decision.
E. None of the above
QUESTION 11
Calculate the project's Profitability index (PI). You must show your manual work to earn credit.
A. 0.97
B. 1.10
C. 1.46
D. None of the above