The graph below represents the IRR of one of the project your company is considering. $400,000 NPV Profile $300,000 $200,000 $100,000 $0 10% 20% 30% 10% 50% 60% 70% 80% 100% -$100,000 Carsl of Caspilial -$200,000 -$300,000 -$400,000 1. Explain why this project has two IRRS and not only one? 2. How can you make investing decision based on the above graph? Explain in details your answer. 3. If the cost of capital is 15%, are you going to accept investing in this project? Why. 4. What will be your decision if the cost of capital is 90%?
The graph below represents the IRR of one of the project your company is considering. $400,000 NPV Profile $300,000 $200,000 $100,000 $0 10% 20% 30% 10% 50% 60% 70% 80% 100% -$100,000 Carsl of Caspilial -$200,000 -$300,000 -$400,000 1. Explain why this project has two IRRS and not only one? 2. How can you make investing decision based on the above graph? Explain in details your answer. 3. If the cost of capital is 15%, are you going to accept investing in this project? Why. 4. What will be your decision if the cost of capital is 90%?
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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Transcribed Image Text:The graph below represents the IRR of one of the project your company is considering.
$400,000
NPV Profile
$300,000
$200,000
$100,000
$0
10%
20%
30%
40%
50%
60%
70%
80%
100%
-$100,000
Ceesl of Gesppilial
-$200,000
-$300,000
-$400,000
1. Explain why this project has two IRRS and not only one?
2. How can you make investing decision based on the above graph? Explain in details your
answer.
3. If the cost of capital is 15%, are you going to accept investing in this project? Why.
4. What will be your decision if the cost of capital is 90%?
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