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1. Your firm projects the following cash flows from a project: Year Cash Flow 0 -$28,000 1 12,000 2 15,000 3 11,000 a. If the
1. Your firm projects the following cash flows from a project:
Year Cash Flow 0 -$28,000 1 12,000 2 15,000 3 11,000
a. If the firm uses the NPV decision rule, and the required return is 11%, should it accept the project? What is the NPV of the project at a discount rate of 20%?
b. If the firm uses the IRR rule, and the appropriate hurdle rate is 14%, should it accept the project? What happens to the IRR if the initial investment is $30,000?
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