1) Last month, Standard Systems analyzed the project whose cash flows are shown below However, before the decision to accept or reject the project took place, the Federal Reserve changed interest rates and therefore the firm's cost of capital (r) The Fed's action did not affect the forecasted cash flows By how much did the change in the r affect the project's forecasted NPV Note that a project's expected NPV can be negative, in which case it should be rejected Old r 10 00 New r 11 25 Year 0 1 2 3 Cash flows $1,000 $410 $410 $410 a $18 89 b $19 88 c $22 03 d $23 13 e $20 93 2) Hart Corp is considering a project that has the following cash flow data What is the project's IRR Note that a project's IRR can be less than the cost of capital or negative, in both cases it will be rejected Year 0 1 2 3 Cash flows $1,000 $425 $425 $425 a 13 87 b 15 29 c 14 56 d 13 21 e 12 55 3) Murray Inc is considering Projects S and L, whose cash flows are shown below These projects are mutually exclusive, equally risky, and not repeatable The CEO wants to use the IRR criterion, while the CFO favors the NPV method You were hired to advise Murray on the best procedure If the wrong decision criterion is used, how much potential value would Murray lose r 6 00 Year 0 1 2 3 4 CF S $1,025 $380 $380 $380 $380 CF L $2,150 $765 $765 $765 $765 a $209 07 b $188 68 c $219 52 d $198 61 e $230 49 4) Wiley's Wire Products is considering a project that has the following cash flow and cost of capital (r) data What is the project's MIRR Note that a project's MIRR can be less than the cost of capital (and even negative), in which case it will be rejected r 11 00 Year 0 1 2 3 Cash flows $800 $350 $350 $350 a 10 94 b 13 50 c 8 86 d 9 84 e 12 15

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1) Last month, Standard Systems analyzed the project whose cash flows are shown below. However, before the decision to accept or reject the project took

Last month, Standard Systems analyzed the project whose cash flows are shown below. However, before the decision to accept or reject the project took place, the Federal Reserve changed interest rates and therefore the firm's cost of capital (r). The Fed's action did not affect the forecasted cash flows. By how much did the change in the r affect the project's forecasted NPV? Note that a project's expected NPV can be negative, in which case it should be rejected.

Old r:	10.00%	New r:	11.25%
Year	0	1	2	3
Cash flows	$1,000	$410	$410	$410

a. $18.89

b. $19.88

c. $22.03

d. $23.13

e. $20.93

Hart Corp. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the cost of capital or negative, in both cases it will be rejected.

Year	0	1	2	3
Cash flows	$1,000	$425	$425	$425

a. 13.87%

b. 15.29%

c. 14.56%

d. 13.21%

e. 12.55%

Murray Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. The CEO wants to use the IRR criterion, while the CFO favors the NPV method. You were hired to advise Murray on the best procedure. If the wrong decision criterion is used, how much potential value would Murray lose?

r:	6.00%
Year	0	1	2	3	4
CF_S	$1,025	$380	$380	$380	$380
CF_L	$2,150	$765	$765	$765	$765

a. $209.07

b. $188.68

c. $219.52

d. $198.61

e. $230.49

Wiley's Wire Products is considering a project that has the following cash flow and cost of capital (r) data. What is the project's MIRR? Note that a project's MIRR can be less than the cost of capital (and even negative), in which case it will be rejected.