Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year Cash

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Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows:

Year                                Cash Flow
0 .............................    −$65,000,000
1 .............................        92,000,000
2 .............................      −11,000,000

a. If the company requires a 10 percent return on its investments, should it accept this project? Why?

b. Compute the IRR for this project. How many IRRs are there? If you apply the IRR decision rule, should you accept the project or not? What’s going on here?

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Corporate Finance

ISBN: 978-1259918940

12th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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