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 %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Consider the relationship between a project’s
Transcribed Image Text: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 %
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