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Answer #1 to 4 please Cost of Capital: Decreasing Cash Flow Conceptual Overview: Explore how the cost of capital affects the net present value of
Answer #1 to 4 please
Cost of Capital: Decreasing Cash Flow Conceptual Overview: Explore how the cost of capital affects the net present value of an investment project's decreasing cash flow This graph shows the net present value of an investment with annual cash fows of-$1,000, $500, $400, $300, and $100 as a function of ditferent cosis of capital (inte est%). Note that this cash flow retums declining amounts after the initial investment. Drag left or right on the graph to move the cursors to sce the net present value (NPV) for different costs of capital. The point were the curve crosses the X-Bxis determines the internal rate of return ORR). (Note: due to limiled pixel resolution, Rs sometimes difficult to get to that precise point) NPV-CF0+2-$1,000 +T-0.1000 500- $78.82 NPV (3) 300 70.92 20 10 Cost of Capital (%) 1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% c. 15% d, 20% -Select 2. When the cost of capital is less than a project's IRR, the NPV for the project is a. negative b. equals the project's IRR c. positive d. cannot be determined -Select 3. If the cost of capital increases, the NPV for the project a. increases b. stays the same c. decreases d. cannot be determined Select- 4. In the unrealistic situion in which the cost of capital were zero, the NPV of the project a. is the sum of the cash flows b. is the upper limit for the NPV of the project c.both of the above statements are correct d. neither of the first two statements is correct -SelectStep by Step Solution
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