ch 11 assignment the basics of capital budgeting year 2 year 3 year 4

Question

Ch 11- Assignment - The Basics of Capital Budgeting
Year
2
Year 3
Year 4
$450,000
$425,000
$450,000
Which of the following is the correct calculation of project Sigma's R
O 27.93%
Ⓒ 32.12%
Ⓒ 30.72%
Ⓒ25.14%
If this is an independent project, the IRR method states that the firm should
If the project's cost of capital were to increase, how would that affect the IR
The IRR would increase
The IRR would not change.
The IRR would decrease
Ch 11- Assignment - The Basics of Capital Budgeting
3. Understanding the IRR and NPV
Year Cash Flow
Year 1
Year 2
Year 3
Year 4
accept project Sigma
reject project Sigma
The net present value (NPV) and internal rate of return (IRR) methods of investment analysis are interrelated and are sometimes used together to
make capital budgeting decisions.
Consider the case of Blue Hamster Manufacturing Inc.:
$1,800,000
$3,375,000
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Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of its planning and financial data when both its main and its backup
servers crashed. The company's CFO remembers that the internal rate of return (IRR) of Project Delta is 11.3%, but he can't recall how
much Blue Hamster originally invested in the project nor the project's net present value (NPV). However, he found a note that detailed
the annual net cash flows expected to be generated by Project Delta. They are:
$3,375,000
$3,375,000
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