Question
The table below shows the un-discounted cash flows of 5 projects over 4 years. Use this following information to answer questions 2 through 6. For
The table below shows the un-discounted cash flows of 5 projects over 4 years. Use this following information to answer questions 2 through 6. For all questions assume that the yearly discount rate is 9%.
| Project | Year 0 | Year 1 | Year 2 | Year 3 | Year 4 |
| A | -$1,000 | $300 | $500 | $500 | $600 |
| B | -$1,000 | $150 | $200 | $1,000 | $1,200 |
| C | -$2,000 | $1,900 | $200 | $0 | $0 |
| D | -$200 | $300 | $0 | $0 | $0 |
| E | -$200 | $300 | $0 | -$100 | $0 |
Q2) If the projects are mutually exclusive which project do you accept?
Q3) Based on your answer from question 2, what is that project's NPV.
Q4) If the projects were not mutually exclusive and you had unlimited money, which projects would you accept?
Q5) Based on your answer from question 4, select the project that has the highest IRR, what is that projects IRR?
Q6) If you are interested in selecting the project(s) with the highest Profitability Index which project(s) would you select. This question may have multiple answer.
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International Financial Management
Authors: Geert Bekaert, Robert J. Hodrick
2nd edition
013299755X, 132162768, 9780132997553, 978-0132162760
