Question
Q1. Consider the following cash flows for Projects A and B, which are mutually exclusive: Year Project A Project B 0 -$4,000,000 -$4,000,000 1 2,000,000
Q1.
Consider the following cash flows for Projects A and B, which are mutually exclusive:
| Year | Project A | Project B |
| 0 | -$4,000,000 | -$4,000,000 |
| 1 | 2,000,000 | 1,000,000 |
| 2 | 1,500,000 | 1,500,000 |
| 3 | 1,250,000 | 1,700,000 |
| 4 | 1,000,000 | 2,400,000 |
The cost of capital (used as the hurdle rate) for both projects is 10%. What is the internal rate of return of project B?
Select one:
A. 15.43%
B. 18.24%
C. 20.19%
D. None of the above
Q2.
Consider the following cash flows for Projects A and B, which are mutually exclusive:
| Year | Project A | Project B |
| 0 | -$4,000,000 | -$4,000,000 |
| 1 | 2,000,000 | 1,000,000 |
| 2 | 1,500,000 | 1,500,000 |
| 3 | 1,250,000 | 1,700,000 |
| 4 | 1,000,000 | 2,400,000 |
The cost of capital (used as the hurdle rate) for both projects is 10%. What is the profitability index of project A?
Select one:
A. 1.17
B. 1.13
C. 1.10
D. None of the above
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
12th Edition
0136096689, 978-0136096689
