Exam 5: Net Present Value and Other Investment Criteria

Project X has the following cash flows: C0 = +2000, C1 = -1,300 and C2 = -1,500. If the IRR of the project is 25% and if the cost of capital is 18%, you would:

The following are disadvantages of using the payback rule except:

Soft rationing may be used to control managerial behavior.

Driscoll Company is considering investing in a new project. The project will need an initial investment of $2,400,000 and will generate $1,200,000 (after-tax) cash flows for three years. Calculate the IRR for the project.

The IRR is defined as:

What would be the weighted average profitability index of the following two investments, given the firm only has $250 to invest? Project A: Cost = $120, NPV = 80 Project B: Cost = $100, NPV = 75