Q6. The financial manager at Genesis Company is looking into the purchase of an apartment complex for $550,000. Net after-tax cash flows are expected to be $65,000 for each of the next five years, then drop to $50,000 for four years. Genesis’ required rate of return is 9% on projects of this nature. After nine years, Genesis Company expects to sell the property for after-tax proceeds of $300,000. What is the respective internal rate of return (IRR) and net present value (NPV) on this project? A) 13.99%; $166,177. B) 6.66%; −$64,170. C) 7.01%; −$53,765.
Q7. Calabash Crab House is considering an investment in mutually exclusive kitchen-upgrade projects with the following cash flows: Project A Project B Initial Year -$10,000 -$9,000 Year 1 2,000 200 Year 2 5,000 -2,000 Year 3 8,000 11,000 Year 4 8,000 15,000 Assuming Calabash has a 12.5% cost of capital, which of the following investment decisions is most appropriate? A) Accept Project A because its internal rate of return is higher than that of Project B. B) Accept both projects because they both have positive net present values. C) Accept Project B because its net present value is higher than that of Project A. | 
发表于 2008-12-30 16:16
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