D076 Module 10 new study set

A company called Bobby's Books is considering purchasing a new bookbinding machine. The company calculates the hurdle rate of the project to be 9% and the IRR to be 11%. Should the company purchase the bookbinding machine? - Yes, because the IRR exceeds the cost of capital. A company is trying to decide which of four projects to invest in. Project 1 has an IRR of 14% and an NPV of $54,000. Project 2 has an IRR of 11% and an NPV of $67,000. Project 3 has an IRR of 9% and an NPV of $60,000. Project 4 has an IRR of 13% and an NPV of $47,000. If the company can do only one project, which project should it choose to add the greatest value to the firm? - Project 2 A potential project to expand the size of an apartment complex will cost $100,000. Its calculated net present value is $5,000. Given this information, which statement is correct? - The project should be accepted because it has a positive NPV. advantages of IRR - is easy to interpret, considers time value of money, and does not require use of required rate of return Advantages of NPV - considers time value of money, calculates value added to the firm, considers risk and required return advantages of PI - considers the time value of money, takes into account the risk of future cash flows through the cost of capital, includes all future cash flows, indicates whether an investment will create value for company An investor just purchased a bond for $973 that has a par value of $1,000. What type of bond is this? - A discount bond