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Richa is looking at the results of a Capital Investment Appraisal. The report shows that, assuming a Cost of Capital of 10%, investing in a plant to manufacture a new clothing line would give a positive NPV and an IRR of 23%. Should the company buy the machine? NPV is positive and IRRexceeds cost of capital. NPV is positive and IRR is less than cost of capital. NPV does not provide enough information. IRR is higher than the cost of capital

Richa is looking at the results of a Capital Investment Appraisal. The report shows that, assuming a Cost of Capital of 10%, investing in a plant to manufacture a new clothing line would give a positive NPV and an IRR of 23%. Should the company buy the machine? NPV is positive and IRRexceeds cost of capital. NPV is positive and IRR is less than cost of capital. NPV does not provide enough information. IRR is higher than the cost of capital

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
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  1. Richa is looking at the results of a Capital Investment Appraisal. The report shows that, assuming a Cost of Capital of 10%, investing in a plant to manufacture a new clothing line would give a positive NPV and an IRR of 23%. Should the company buy the machine?
    1. NPV is positive and IRRexceeds cost of capital.
    2. NPV is positive and IRR is less than cost of capital.
    3. NPV does not provide enough information.
    4. IRR is higher than the cost of capital

     

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