Question
The IRR rule suffers from several drawbacks, one of which has to do with projects of unconventional cashflows. In this assignment, we will be able
The IRR rule suffers from several drawbacks, one of which has to do with projects of "unconventional cashflows." In this assignment, we will be able to demonstrate why unconventional cashflows disqualifies IRR.
Use the table below (also at the bottom of page 4 in the course workbook) to create a plot of discount rate vs NPV (as we demonstrated in class for IRR Excel work.) Please use the following range of discount rates: 0% to 85% at 5% increments.
Year | Cash Flows |
0 1 2 3 4 5 | -170 160 160 160 160 -520 |
Use your Excel work to answer the questions posed in this assignment. You have only 1 attempt, so please record your responses when you're ready to submit.
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Question 13 pts
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Question 21 pts
What is the NPV using the discount rate of 5%?
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Question 31 pts
What is the NPV using the discount rate of 10%?
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Question 41 pts
What is the NPV using the discount rate of 65%?
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Question 51 pts
What is the NPV using the discount rate of 70%?
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Question 63 pts
Why is the IRR inappropriate for this particular project? State in 1-2 sentences.
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