Webley Corp. is considering two expansion options, but does not have enough capital to undertake both, Project W requires an investment of $100,000 and has an NPV of $10,000. Project D requires an investment of $80,000 and has an NPV of $8,200. If Webley uses the profitability index to decide, it would
A) choose D because it has a higher profitability index.
B) choose W because it has a higher profitability index.
C) choose D because it has a lower profitability index.
D) choose W because it has a lower profitability index.
If a project has a profitability index greater than 1
A) the npv will also be positive.
B) the irr will be higher than the required rate of return.
C) the present value of future cash flows will exceed the amount invested in the project.
D) all of the above.
A project has an initial outlay of $4,000. It has a single payoff at the end of Year 4 of $6,996.46. What is the IRR for the project (round to the nearest percent)?
A) 16%
B) 13%
C) 21%
D) 15%
Given the following annual net cash flows, determine the IRR to the nearest whole percent of a project with an initial outlay of $1,800.
Year Net Cash Flow
1 $1,000
2 $750
3 $500
A) 14%
B) 12%
C) 8%
D) 25%
Initial Outlay Cash Flow in Period
1 2 3 4
-$4,000 $1,546.17 $1,546.17 $1,546.17 $1,546.17
The IRR (to the nearest whole percent) is
A) 10%.
B) 18%.
C) 20%.
D) 16%.
Your company is considering a project with the following cash flows:
Initial outlay = $1,748.80
Cash flows Years 1-6 = $500
Compute the IRR on the project.
A) 9%
B) 11%
C) 18%
D) 24%
