1st Blank Options: MIRR; Required Rate of Return; IRR

2nd Blank Options: Same as above

3rd Blank Options: IRR Method; NPV Method

Projects Y and Z are mutually exclusive projects. Their cash flows and NPV profiles are shown as follows. Year Project Y -$1,500 $200 $400 $600 $1,000 Project 2 -$1,500 $900 $600 $300 $200 2 4 NPV (Dollars) 800 Project Y Project 2 -200 0 2 4 6 8 10 12 14 16 18 20 COST OF CAPITAL (Percent) If the weighted average cost of capital (WACC) for each project is 6%, do the NPV and IRR methods agree or conflict? O The methods conflict. O The methods agree. A key to resolving this conflict is the assumed reinvestment rate. The IRR calculation assumes that intermediate cash flows are reinvested at the , and the NPV calculation implicitly assumes that the rate at which cash flows can be reinvested is the As a result, when evaluating mutually exclusive projects, the is usually the better decision criterion