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1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% C. 15% d. 20% -Select- V 2. When the cost of capital is less than a project's IRR, the NPV for the project is a. negative b. equals the project's IRR C. positive d. cannot be determined -Select- v 3. If the cost of capital increases, the NPV for the project a. increases b. stays the same C. decreases d. cannot be determined Select- v

1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% C. 15% d. 20% -Select- V 2. When the cost of capital is less than a project's IRR, the NPV for the project is a. negative b. equals the project's IRR C. positive d. cannot be determined -Select- v 3. If the cost of capital increases, the NPV for the project a. increases b. stays the same C. decreases d. cannot be determined Select- v

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% C. 15% d. 20% -Select- v 2. When the cost of capital is less than a project's IRR, the NPV for the project is a. negative b. equals the project's IRR C. positive d. cannot be determined -Select- v 3. If the cost of capital increases, the NPV for the project a. increases b. stays the same C. decreases d. cannot be determined -Select- 4. In the unrealistic situion in which the cost of capital were zero, the NPV of the project a. is the sum of the cash flows b. is the upper limit for the NPV of the project c. both of the above statements are correct d. neither of the first two statements is correct -Select e to search
Transcribed Image Text:1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% C. 15% d. 20% -Select- v 2. When the cost of capital is less than a project's IRR, the NPV for the project is a. negative b. equals the project's IRR C. positive d. cannot be determined -Select- v 3. If the cost of capital increases, the NPV for the project a. increases b. stays the same C. decreases d. cannot be determined -Select- 4. In the unrealistic situion in which the cost of capital were zero, the NPV of the project a. is the sum of the cash flows b. is the upper limit for the NPV of the project c. both of the above statements are correct d. neither of the first two statements is correct -Select e to search
Exploring Finarice Cost or Capital with Dereasing Casn Flow This graph shows the net present value of an investment with annual cash flows of -$1,000, $500, $400, $300, and $100 as a function of different costs of capital (interest %). Note that this cash flow returns declining amounts after the initial investment. Drag left or right on the graph to move the cursors to see the net present value (NPV) for different costs of capital. The point where the curve crosses the X-axis determines the internal rate of return (IRR). (Note: due to limited pixel resolution, it is sometimes difficult to get to that precise point.) NPV = CFo+E=t CF $500 (1+0,1000)!T (1+0, 1000)? + (1+0. 1000 + T+0 1000y4 = $78.82 =-$1, 000 + $400 $300 NPV ($) 500- 400 - 300 200- 100- 78.82 10 10 -100- Cost of Capital (%) Created by Gary H. McClelland, Professor Emeritus University of Colorado Boulder O Cengage Learning. All Rights Reserved. 9:41 PM 80°F e to search 8/10/2021 lyp
Transcribed Image Text:Exploring Finarice Cost or Capital with Dereasing Casn Flow This graph shows the net present value of an investment with annual cash flows of -$1,000, $500, $400, $300, and $100 as a function of different costs of capital (interest %). Note that this cash flow returns declining amounts after the initial investment. Drag left or right on the graph to move the cursors to see the net present value (NPV) for different costs of capital. The point where the curve crosses the X-axis determines the internal rate of return (IRR). (Note: due to limited pixel resolution, it is sometimes difficult to get to that precise point.) NPV = CFo+E=t CF $500 (1+0,1000)!T (1+0, 1000)? + (1+0. 1000 + T+0 1000y4 = $78.82 =-$1, 000 + $400 $300 NPV ($) 500- 400 - 300 200- 100- 78.82 10 10 -100- Cost of Capital (%) Created by Gary H. McClelland, Professor Emeritus University of Colorado Boulder O Cengage Learning. All Rights Reserved. 9:41 PM 80°F e to search 8/10/2021 lyp
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