N Year Project A 0 -$10,000.00 $ 1 2,500.00 $ 3,000.00 $ 3 4,000.00 $ 4 4,500.00 $ 5 5,000.00 The Cost of Capital is 12%. Based on the IRR rule, Project A should be rejected. True False You have made the following projections: Year Revenues COGS DEP EBIT 1 5000 3000 1000 1000 2 6000 3600 1000 1400 3 7000 4200 1000 1800 4 8000 4800 1000 2200 This project requires an initial investment of $11,000 and will have a salvage value of $7,000 at the end of 4 years. The working capital is expected to be 5% of revenues. The working capital investments are made at the beginning of the year. We assume that all investments in working capital will be recovered at the end of 4 years. The tax rate is 40% and the cost of capital is 12%. Based on the NPV decision rule, the project should be accepted True False You have made the following projections: Year Revenues COGS DEP EBIT 1 5000 3000 1000 1000 2 6000 3600 1000 1400 3 7000 4200 1000 1800 4 8000 4800 1000 2200 This project requires an initial investment of $11,000 and will have a salvage value of $7,000 at the end of 4 years. The working capital is expected to be 5% of revenues. The working capital investments are made at the beginning of the year. We assume that all investments in working capital will be recovered at the end of 4 years. The tax rate is 40% and the cost of capital is 12%. The free cash flow to the firm in Year 4 is $9720 True False N Year Project A 0 -$10,000.00 $ 1 2,500.00 $ 2 3,000.00 $ 3 4,000.00 $ 4 4,500.00 $ 5 5,000.00 The Cost of Capital is 12%. Based on the IRR rule, Project A should be rejected. 5 True False