Kase Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires

Question:

Kase Company can invest in each of three cheese-making projects: C1, C2, and C3. Each project requires an initial investment of $190,000 and would yield the following annual cash flows.

CI C2 C3 Year I. $ 10,000 $ 80,000 $150,000 90,000 80,000 Year 2 50,000 40,000 Year 3 140,000 80,000 Totals $240,000 $24

(1) Assuming that the company requires a 12% return from its investments, use net present value to determine which projects, if any, should be acquired.
(2) Using the answer from part 1, explain whether the internal rate of return is higher or lower than 12% for project C2.
(3) Compute the internal rate of return for projectC2.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...