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.