Use the following for Questions $1-5$:

You are considering two mutually exclusive projects, A and B$.$

Project A costs $$65,000$ and generates cash flows of $$12,000$ for $10$ years.

Project B costs $$62,500$ and generates cash flows of $$2,000$ for seven years and then generates a cash flow of $$140,000$ in year $8.$

Report rates in percentage form to two decimal places i$.$e$.10\mathrm{.}03\%$ not $10\%$

Question $1$

Calculate what discount rate would make you indifferent between choosing one project or another. i$.$e$.$ what discount rate produces the same NPV for both projects?

Question $2$

Which project would you ACCEPT if your discount rate was $12\%?$

Question $2$ options:

A$)$

Project A

B$)$

Project B

C$)$

Both Project A and B

D$)$

Neither Project A or B

Question $3$

Which project would you ACCEPT if your discount rate was $12\mathrm{.}5\%?$

Question $3$ options:

A$)$

Project A

B$)$

Project B

C$)$

Both Project A and B

D$)$

Neither Project A or B

Question $4$

Which project would you ACCEPT if your discount rate was $13\%?$

Question $4$ options:

A$)$

Project A

B$)$

Project B

C$)$

Both Project A and B

D$)$

Neither Project A or B

Question $5$

Which project would you ACCEPT if your discount rate was $14\%?$

Question $5$ options:

A$)$

Project A

B$)$

Project B

C$)$

Both Project A and B

D$)$

Neither Project A or B

Question $6$

What is the highest discount rate in which you can still produce a non$-$negative NPV for at least one project? $($Give the $\%)$

Question $7$

An INDEPENDENT project costs $$2,000,000$ and will return cash flows of $$700,000$ for $3$ years and $$50,000$ for the $3$ years after that. In the seventh year, you will need to upgrade the equipment at a net cost of $$850,000(<-$ negative cash flow in year $7)$

If you knew the firm's cost of capital rate $($discount rate$),$ which of the following measures would you use to determine whether to clearly ACCEPT or REJECT the project?

Question $7$ options:

A$)$

NPV

B$)$

IRR

C$)$

PI

D$)$

Payback Period

E$)$

All of the above

F$)$

NPV and PI

G$)$

NPV$,$ IRR, and PI

H$)$

None of the above

Question $8$

An INDEPENDENT project costs $$600,000$ and will return cash flows of $$200,000$ for $5$ years.

If you knew the firm's cost of capital rate $($discount rate$),$ which of the following measures would you use to determine whether to clearly ACCEPT or REJECT the project?

Question $8$ options:

A$)$

NPV

B$)$

IRR

C$)$

PI

D$)$

Payback Period

E$)$

All of the above

F$)$

NPV and PI

G$)$

NPV$,$ IRR, and PI

H$)$

None of the above