Consider the relationship between a project's net present value (NPV), its internal rate of return (IRR), and a company's cost of capital. For each scenario that follows, indicate the relative value of the unknown. If cost of capital is unknown, indicate whether it would be higher or lower than the stated IRR. If NPV is unknown, indicate whether it would be higher or lower than zero. Project 1 is shown as an example. Internal Rate of Return Cost of Capital 13 % Net Present Value Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 13 % 10 % 14 % 12 % 8 % 10 % 9 %
Consider the relationship between a project's net present value (NPV), its internal rate of return (IRR), and a company's cost of capital. For each scenario that follows, indicate the relative value of the unknown. If cost of capital is unknown, indicate whether it would be higher or lower than the stated IRR. If NPV is unknown, indicate whether it would be higher or lower than zero. Project 1 is shown as an example. Internal Rate of Return Cost of Capital 13 % Net Present Value Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 13 % 10 % 14 % 12 % 8 % 10 % 9 %
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 3DQ
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