AGEC 340 Class Assignment Date: Name: Class Assignment 18 1. The initial costs of investment for both Project A and Project Bare 55,000. The discount rate is 10 Year After-Tax Net Revenues (5) Project A Project B 3,000 5.000 3,000 a. Compute the NPVs of both projects. Which project should be selected? b. Compute the B/C ratios of both projects. Which project should be selected? AGEC 340 Class Assignment Date: Name: 2. What is the IRR for an investment that requires a $5,000 initial investment and yields $5.800 cash payment one year in the future? If your required rate of return is 10%, will you invest in this project? 3. Which of the following capital budgeting method is a direct measure of how well the investment will meet the goal of increasing firm value? a. Payback period b. Net present value c. Internal rate of return 4. Which of the following capital budgeting method answers the question of which project will recoup the initial investment the quickest"? a. Payback period b. Net present value c. Internal rate of return 5. Does the Internal Rate of Return method take the time value of money into consideration? a. Yes b. No 6. Does the NPV method consider all the cash flows? a. Yes b. No 7. With a discount rate of 10%, the NPV of an investment is $0. What is the IRR of this investment? a. 10% b. Cannot be determined from the given information 8. The B/C ratio is not sensitive to changes in estimates of future cash flows and salvage value a. True b. False