Question
Consider the following three projects: Project/time line 0 1 2 3 4 A -95 50 40 40 0 B -115 35 40 45 50 C
Consider the following three projects:
Project/time line | 0 | 1 | 2 | 3 | 4 |
A | -95 | 50 | 40 | 40 | 0 |
B | -115 | 35 | 40 | 45 | 50 |
C | -125 | 60 | 60 | 60 | -20 |
The cost of capital of the firm is 10%.
Based on the IRR decision rule:
1. Should you invest in Project A?
Below are multiple choice for the IRR calculation
i) 16.55%
ii) 17.61%
iii) 18.31%
iv) 20.22%
v) Cannot calculate
Answer: I should/should not (choose one) invest in Project A.
2. Should you invest in Project B?
Below are multiple choice for the IRR calculation
i) 16.55%
ii) 17.61%
iii) 18.31%
iv) 20.22%
v) Cannot calculate
Answer: I should/should not (choose one) invest in Project B.
3. Should you invest in Project C?
Below are multiple choice for the IRR calculation
i) 16.55%
ii) 17.61%
iii) 18.31%
iv) 20.22%
v) Cannot calculate
Answer: I should/should not (circle one) invest in Project C.
4. Assume that we can only take one of the projects. Which one would we choose?
Answer: You would choose project ____________
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