FINAL EXAM

Final Examination Financial Management

 Part A: Solve each of the following problems. Each answer is worth 20 points.

1. Two mutually exclusive investments cost $10,000 each and have the following cash inflows. The firm’s cost of capital is 10%.

A. What is the net present value of each investment?

B. What is the internal rate of return of each investment?

C. Which investment(s) should the firm make?

D. Would your answers be different to C if the funds received in Year 2 for investment A could be reinvested at 16%?