a) 22.89% b) 0.23% c) 100% d) 118.18% Illustration 2 A firm must choose from six independent capital budgeting proposals outlined be subject to capital rationing and has a capital budget of $1,000,000, the firm's cost of capital i percent per year. ow. The firm is s 15 Project | Initial investment, s i | 200,000 400,000 250,000 200,000 150,000 400,000 IRR, % 19 17 16 12 20 15 NPV, $ 100,000 20,000 60,000 - 5,000 50,000 50,000 4 6 8) See illustration 2, if the firm is using the Profitability Index approach to ranking these projects, which project(s) should the firm accept? ) 1, 2, 3, 5, and 6 b) 1, 2, 3, and 5 C) 2, 3, 4, and 6 d) 1, 3, 5, and 6 9) What is the IRR for the following project if its initial after-tax cost is $4,000,000 and it is expected to provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in year 3, and $1,300,000 in year 4? a) 15.57% b) 25.87% c) 13.57% d) 12.25% 10) A firm with a weighted average annual cost of capital of 16 percent is evaluating three mutually exclusive capital budgeting projects. The internal rates of return of these projects are as follows: 1 Project 2 Project 3 13% IRR 14% 15% The firm should a) accept all projects b) accept Project 2, and reject Projects 1 and 3 c) accept Project 3, and reject Projects 1 and 2 d) reject all projects