18. Zainab has an investment opportunity that requires an initial investment of $5000 today and will pay $6000 in one year. What is the IRR of her opportunity? (Ref: BMA, 13/e, Ch 2&5) Answer:

19. Mansoor Inc. is considering the following two projects: Year Project 1 Cash Flow Project 2 Cash Flow 0 -$100 ? 1 30 40 2 50 80 3 40 60 4 50 60 The two projects have the same payback period. What is Project 2s internal rate of return (IRR)? (Ref: BMA, 13/e, Ch 2&5) a. 44.27% b. 23.40% c. 20.85% d. 14.73% e. 17.64% Answer:

20. Your boss has just congratulated you on the wonderful job you did this year. In order to formally recognize your achievements, he would like to either give you a bonus, or increase your salary. If you take the bonus, you will receive $5,000 immediately. The salary increase would be a 1.5% addition to the 40,000 per annum you currently receive, payable at each year-end. In either event, you must pay taxes at a rate of 44% and plan to work at this company for the next 10 years. If you can invest any earning at a rate of 7%, which should you choose? (Ref: BMA, 13/e, Ch 2) Answer: