Question

44) Find the project is $45,00o. Initial cost of the peoject is $76.000 B087 C177 D)159 45) When you by ldentiftyoa plot t t ate ONP profile) d of a g the point where the NPV equals Zero: True or False 45) When you are analyzing utally and IRR, you are better off wsing_ choose exclusive peojects, if you have a conflict between NPV to make the final choice as to which project to perojects a) NPV 47) How many IRR's exist in the following project Year 1:540,000, Year 2: Mimas $20,000; Year 3: Minas $20,000 2 IRR'sB)4 IRR's C3IRR's D) one IRR 48) Find the beta of the portfolio of the following three stocks: b) IRR : Today: Cost is $50,000, Beta of stock Stock Amount invested 1.5 0.4 Minus 0.5 $20,000 $70,000 $10,000 dy0.53 c)0.59 b)0.46 a) 0.25

Answer 1

44). PI = 1 + (NPV/Initial Investment) = 1 + (45,000/76,000) = 1 + 0.59 = 1.59

Hence, Option "D" is correct.

45). As IRR is the rate at which NPV is zero. Hence the statement is True.

46). NPV. When facing such a situation, the project with a higher NPV should be chosen because there is an inherent reinvestment assumption.

47). Option Ä is correct.

As the sign change happens twice. Hence, there will be two IRRs.

48). $\beta$_P = $\sum_{i=1}^{n}$ [Wi x $\beta$i]

= [(2/10) x 1.5] + [(7/10) x 0.4] + [(1/10) x (-0.5)] = 0.3 + 0.28 - 0.05 = 0.53

Hence, Option "D" is correct.