1. If the net present value is higher than the initial investment, it is an indicator of an acceptable project.
2. If the the internal rate of return is smaller than the required rate of return, it is an indicator of an acceptable project.
3. If the the internal rate of return is positive, it is an indicator of an acceptable project.
4. The final decision on which one of two mutually exclusive projects to accept ultimately depends upon initial cost of each project. Part II. Calculation
5. A project will produce cash inflows of $2,800 a year for 4 years with a final cash inflow of $5,700 in year 5. The project's initial cost is $9,500. What is the net present value of this project if the required rate of return is 16 percent?
6. Day Interiors is considering a project with the following cash flows. Compute the IRR. If the required rate of return is 8%, would this project be accepted?
7. You are considering two mutually exclusive projects with the following cash flows. Suppose the discount rate is 13 percent? Compute the NPV of both projects. Which project(s) should you choose based on the two methods?