5. You can borrow $8,000, to be repaid in installments of $2,200 at the end of each of the next 5 years. Use the IRR to determine whether this loan is preferable to borrowing at the rate of 11.5%.

6. A firm is considering the following mutually exclusive investment projects. Project A requires an initial outlay of $500 and will return $120 per year for the next seven years. Project B requires an initial outlay of $5,000 and will return $1,350 per year for the next five years. The required rate of return is 10%. Use the net present value criterion to determine which investment is preferable.

7. Calculate the internal rate of return and PI for each of the projects described in the previous problem.