1.) An investment has an initial cost of $400,000. It is a four-year project with expected cash flows as shown below. If you require a 15.5% IRR on the project, should you proceed? Why or why not?

Year 1 2 3 4

Net income $120,000 $124,600 $138,700 $130,000

2.) An investment has an initial cost of $200,000 and a life of four years. It is expected to generate net cash flows as shown below. Should this project be accepted based on a discount rate of 8%? Why or why not?

Year 1 2 3 4

Cash Flow $28,000 $70,600 $88,700 $92,400

3.) You are considering the following two mutually exclusive projects. The required return on each project is 12 percent. Which project should you accept and what s the best reason for that decision?

Project A Project B

Year 0 -$10,000 -$20,000

Year 1 $ 3,000 $ 5,000

Year 2 $ 8,000 $ 7,000

Year 3 $ 4,000 $12,000

Year 4 $2,000 $10,000