# Suppose a project costs $1,000 and produces cash flows of $200 over each of the next three years and a cash flow of $250 for each of the years four to six.

Use the following information for this and the next question.

Suppose a project costs $1,000 and produces cash flows of $200 over each of the next three years and a

cash flow of $250 for each of the years four to six.

What is the IRR of the project?

a. 15.2%

b. 10.0%

c. 24.3%

d. 8.8%

What is the NPV of the project if the required rate of return is 8 percent?

a. $350

b. $160

c. $27

d. $0

The following information is for this and the following two questions.

X and Y, LLC has two mutually exclusive projects available. The cash flows from these projects are

shown below.

What is the IRR of Project A and Project B, respectively?

a. 17.48% and 17.03%

b. 14.71% and 16.09%

c. 16.09% and 14.71%

d. 19.84% and 18.31%

If the required rate of return is 12%, what is the NPV of Project A and Project B, respectively?

a. $3,568 and $3,974

b. $3,568 and $7,051

c. $5,735 and $3,974

d. $5,735 and $7,051

What is the crossover rate between Project A and Project B?a. 18.31%

b. 14.17%

c. 16.09%

d. 19.84%

What is the Net Future Value (Terminal Value) of the following set of cash flows at 10% rate? (Hint: To

calculate terminal values, calculate the future value of all cash flows at the end of the project, and add

them together, that is, NFV = FV of Cash Inflows – FV of Cash Outflows) (Answers are rounded.)

a. $ 0.00

b. –$500

c. –$770

d. –$1,360

Your required return is 12%. Should you accept a project with the following cash flows?

a. No, because the IRR is 13.9%.

b. No, because the IRR is 8.0%.

c. Yes, because the IRR is 13.9%.

d. Yes, because the IRR is 8.0%.

Use the following information for this and the next two question.

Suppose a project costs $222,000 at start up, generates a cash flows of $560,000 in year one, and costs

$350,000 in year 2. There are no cash flows after year 2.

What is the first (lowest) IRR of the project?

a. 14.2083%

b. 10.0000%

c. 24.3125%

d. 38.0439%

What is the second IRR of the project?

a. 14.2083%

b. 10.0000%

c. 24.3125%

d. 38.0439%

What is the NPV of the project at 25 percent required rate of return?

a. 306.24

b. 1,611.11

c. 2,000.00

d. 1,668.64

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