Question 1: You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 7 percent? What if the discount rate is 10 percent?
Year Porject A Project B
0 -275,000 -202,000
1 0 113,600
2 0 81,900
3 360,000 47,000
Question 2: You are considering an investment with the following cash flows. If the required rate of return for this investment is 15.25 percent, should you accept the investment based solely on the internal rate of return rule? Why or why not?
Year Cahsflow
0 -137,900
1 82,400
2 67,300
3 -2,500