Question
7. An investment cost $16,000 and has a Profitability Index of 1.10. What is the net present value for this investment 9. An investment has
7. An investment cost $16,000 and has a Profitability Index of 1.10. What is the net present value for this investment 9. An investment has two Internal Rates of Return, 15% and 28%. Describe how you would determine the range of costs of capital that would return a positive net present value for this investment. 10. Investment A and B cost the same, but Investment Bs IRR is 24% while Investment As is 18%. At a cost of capital of 15%, however, the net present value of the two projects is the same. What range of costs of capital would cause you to: a. Choose Investment A b. Choose Investment B 11. You are choosing between two investments, X and Y, which cost the same but have different cash flows in each of their 5-year lives. All you know about these cas flows is the difference between Xs and Ys cash flows in each of those 5 years. Your cost of capital is 16%. You only have enough funding for one of the investments, so how would you determine which one to choose?
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