If a project has an internal rate of return of 13% and a negative net present value, which of the following statements is true regarding the discount rate used for the net present value computation? O The discount rate must have been 0%. O The discount rate must have been less than 13%. O The discount rate must have been equal to 13%. O The discount rate must have been greater than 13%. Diggertown Products wants to buy a new machine and has narrowed its options to two choices. Both machines cost $40,000. The following data shows the expected cash inflows from each machine: Year Machine #1 Machine #2 $20,000 $60,000 2 20,000 0 3 20,000 When figuring net present value, Diggertown uses the same cost of capital for both machines and both machines have a positive net present value. Based on this information, which statement is true? O Machine # 1 will have a higher net present value than Machine #2. O Machine # 1 will have a lower net present value than Machine #2. O Machine # 1 and Machine #2 will have the same net present values. O Machine # 1 and Machine #2 will have the same internal rates of return. All of the following are qualitative factors to be considered when evaluating capital investments except: providing new product lines to draw customers to other, more profitable product lines O maintaining a reputation as the industry leader in innovation. O minimizing taxes. O considering the social benefits of investing in pollution control devices. A project requires an initial investment of $500,000 and will return $140,000 each year for six years Factors: Present Value of $1 Factors: Present Value of an Annuity (r-1096) (r-10%) Year O 1.0000 Year 1 0.9091 Year 1 0.9091 Year 2 0.8264 Year 2 1.7355 Year 3 0.7513 Year 3 2.4869 Year 4 0.6830 Year 4 3.1699 Year 5 0.6209 Year 5 3.7908 Year 6 0.5645 Year 6 4.3553 If taxes are ignored and the required rate of return is 10%, what is the project's net present value (rounded to the nearest dollar)? $340,000 O $114,803 O $420,970 O $109,742 A project requires an initial investment of $500,000 and will return $140,000 each year for six years Factors: Present Value of $1 Factors: Present Value of an Annuity (r-10%) (r-10%) Year 0 1.0000 Year 1 0.9091 Year 1 0.9091 Year 2 0.8264 Year 2 1.7355 Year 3 0.7513 Year 3 2.4869 Year 4 0.6830 Year 4 3.1699 Year 5 0.6209 Year 5 3.7908 Year 6 0.5645 Year 6 4.3553 Ignoring qualitative issues and income taxes, should the company invest in this project? O There is not enough quantitative information to answer this question O Yes, because the net present value shows a return that is above the company's required rate of return. O No, because there is no information on the salvage value. O No, because the net present value shows a return that is less than the company's required rate of return