Question 1

What is the IRR corresponding to this cashflow diagram?

Accepted Answer

A) About 10.5% 
B) About 11.5% 
C) About 12.5% 
D) About 13.5% 
E) About 14.5% 
A) About 10.5% 
B) About 11.5% 
C) About 12.5% 
D) About 13.5% 
E) About 14.5%

Question 2

For two mutually exclusive projects with equal lives, the one with

Accepted Answer

A) a higher IRR should be chosen. 
B) a higher incremental PW at the MARR should be chosen. 
C) a higher incremental FW at the MARR should be chosen. 
D) a higher incremental IRR than the MARR should be chosen. 
E) a higher incremental AW at the MARR should be chosen. 
A) a higher IRR should be chosen. 
B) a higher incremental PW at the MARR should be chosen. 
C) a higher incremental FW at the MARR should be chosen. 
D) a higher incremental IRR than the MARR should be chosen. 
E) a higher incremental AW at the MARR should be chosen.

Question 3

If you invest $1 000 now, you will receive this amount back in two years plus dividends of $200 each year. What is the IRR of this investment?

Accepted Answer

We set up the following equati

Question 4

Sarah is considering the purchase of ski equipment for $300. It could save her the $60 per year of rental fees she envisions over the six year life of the ski equipment. What is the IRR of investing in the ski equipment?

Accepted Answer

PW of disbursements = 300
PW of rental c

Question 5

Steve is a professional web-site designer. He just bought a powerful computer for $5 000. According to the existing market, he will be able to sell this computer for $1 000 three years from now. In order for Steve to get 10% internal rate of return on his computer, what annual revenue should he generate over the three-year period?

Accepted Answer

It is possible to set up the f

Question 6

Explain how you would compare two mutually exclusive projects on the basis of the internal rate of return.

Accepted Answer

First calculate the IRR for both alterna

Question 7

An investor has the following properties to invest in over a period of three years and uses a MARR of 9%:
   Using incremental IRR, which property, if any, should she invest in?

Accepted Answer

Starting with Property 4, the least firs

Question 8

There are two options to buy a plot of land for construction: (i)upfront payment of $250 000, or (ii)four equal payments of $50 000 in years 1-4 and the fifth payment of $150 000 in year 5. What is the implied IRR of choosing the second option over the first?

Accepted Answer

If the second option is chosen, then $25

Question 9

You can buy a car for $40 000 paying cash now or you can finance it through a bank loan paying $700 per month for 5 years. What is the IRR of the financing option in annual terms?

Accepted Answer

By definition, the IRR equates present w

Question 10

A project requires an initial investment of $100 000 and immediately pays $25 000. The next year this project requires an additional investment of $50 000 and does not pay anything. In the following year the project pays $150 000. The internal rate of return (i)for this project can be obtained by

Accepted Answer

A) using a present worth factor. 
B) solving a quadratic equation. 
C) calculating an external rate of return. 
D) solving a system of two equations. 
E) solving an ith degree polynomial equation. 
A) using a present worth factor. 
B) solving a quadratic equation. 
C) calculating an external rate of return. 
D) solving a system of two equations. 
E) solving an ith degree polynomial equation.

What is the IRR corresponding to this cashflow diagram?

For two mutually exclusive projects with equal lives, the one with

If you invest $1 000 now, you will receive this amount back in two years plus dividends of $200 each year. What is the IRR of this investment?

Sarah is considering the purchase of ski equipment for $300. It could save her the $60 per year of rental fees she envisions over the six year life of the ski equipment. What is the IRR of investing in the ski equipment?

Explain how you would compare two mutually exclusive projects on the basis of the internal rate of return.

An investor has the following properties to invest in over a period of three years and uses a MARR of 9%: Using incremental IRR, which property, if any, should she invest in?

There are two options to buy a plot of land for construction: (i)upfront payment of $250 000, or (ii)four equal payments of $50 000 in years 1-4 and the fifth payment of $150 000 in year 5. What is the implied IRR of choosing the second option over the first?

You can buy a car for $40 000 paying cash now or you can finance it through a bank loan paying $700 per month for 5 years. What is the IRR of the financing option in annual terms?

A project requires an initial investment of $100 000 and immediately pays $25 000. The next year this project requires an additional investment of $50 000 and does not pay anything. In the following year the project pays $150 000. The internal rate of return (i)for this project can be obtained by

Engineering Decision Making

Time Value of Money

Cash Flow Analysis

Comparison Methods: Part I

Financial Accounting and Business Plans

Replacement Decisions

Taxes

Inflation

Public Sector Decision Making

Project Management

Dealing With Uncertainty and Risk

Filters

Exam 5: Comparison Methods: Part Ii

What is the IRR corresponding to this cashflow diagram?

For two mutually exclusive projects with equal lives, the one with

If you invest $1 000 now, you will receive this amount back in two years plus dividends of $200 each year. What is the IRR of this investment?

Sarah is considering the purchase of ski equipment for $300. It could save her the $60 per year of rental fees she envisions over the six year life of the ski equipment. What is the IRR of investing in the ski equipment?

Explain how you would compare two mutually exclusive projects on the basis of the internal rate of return.

An investor has the following properties to invest in over a period of three years and uses a MARR of 9%: Using incremental IRR, which property, if any, should she invest in?

There are two options to buy a plot of land for construction: (i)upfront payment of $250 000, or (ii)four equal payments of $50 000 in years 1-4 and the fifth payment of $150 000 in year 5. What is the implied IRR of choosing the second option over the first?

You can buy a car for $40 000 paying cash now or you can finance it through a bank loan paying $700 per month for 5 years. What is the IRR of the financing option in annual terms?

A project requires an initial investment of $100 000 and immediately pays $25 000. The next year this project requires an additional investment of $50 000 and does not pay anything. In the following year the project pays $150 000. The internal rate of return (i)for this project can be obtained by

Engineering Decision Making

Time Value of Money

Cash Flow Analysis

Comparison Methods: Part I

Financial Accounting and Business Plans

Replacement Decisions

Taxes

Inflation

Public Sector Decision Making

Project Management

Dealing With Uncertainty and Risk

Filters