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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 inal investment. Draglet 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 neum (RR). (Note due to limited pixel resolution, it is sometimes difficult to get to that precise point) NPV CF+Σ NPV (5) 500 $300 $400 -$1,000++=+=+a $100 -$-25.69 1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% c. 15% d. 20% -Select- Cost of Capital (%) 2. When the cost of capital is less than a project's IRR, the NPV for the project is -Select a. negative b. equals the project's IRR c. positive d. cannot be determined 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- 0 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 -Select- c. both of the above statements are correct d. neither of the first two statements is correct

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 inal investment. Draglet 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 neum (RR). (Note due to limited pixel resolution, it is sometimes difficult to get to that precise point) NPV CF+Σ NPV (5) 500 $300 $400 -$1,000++=+=+a $100 -$-25.69 1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% c. 15% d. 20% -Select- Cost of Capital (%) 2. When the cost of capital is less than a project's IRR, the NPV for the project is -Select a. negative b. equals the project's IRR c. positive d. cannot be determined 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- 0 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 -Select- c. both of the above statements are correct d. neither of the first two statements is correct

Economics (MindTap Course List)
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
ChapterA: Working With Diagrams
Section: Chapter Questions
Problem 2QP
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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 inal investment. Draglet 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 neum (RR). (Note due to limited pixel resolution, it is sometimes difficult to get to that precise point) NPV CF+Σ NPV (5) 500 $300 $400 -$1,000++=+=+a $100 -$-25.69 1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% c. 15% d. 20% -Select- Cost of Capital (%) 2. When the cost of capital is less than a project's IRR, the NPV for the project is -Select a. negative b. equals the project's IRR c. positive d. cannot be determined 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- 0 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 -Select- c. both of the above statements are correct d. neither of the first two statements is correct
Transcribed Image Text: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 inal investment. Draglet 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 neum (RR). (Note due to limited pixel resolution, it is sometimes difficult to get to that precise point) NPV CF+Σ NPV (5) 500 $300 $400 -$1,000++=+=+a $100 -$-25.69 1. What is the approximate IRR for the cash flow curve depicted? a. 5% b. 10% c. 15% d. 20% -Select- Cost of Capital (%) 2. When the cost of capital is less than a project's IRR, the NPV for the project is -Select a. negative b. equals the project's IRR c. positive d. cannot be determined 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- 0 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 -Select- c. both of the above statements are correct d. neither of the first two statements is correct
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