Question 1 (20 Points)

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%.

a.

Based on the IRR ( internal rate of return) decision rule: i. Should you invest in Project A?

Below are multiple choice for the IRR ( internal rate of return ) 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 A.

ii. Should you invest in Project B? Below are multiple choice for the IRR ( internal rate of return ) 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 B.

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iii. 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.

b.

Assume that we can only take one of the projects. Which one would we choose?

Answer: You would choose project ____________