5. Consider the following three diagrams of the relationship between net present

Question

5. Consider the following three diagrams of the relationship between net present value (NPV) and the interest rate at which future costs and benefits are discounted.

A. Which of these three diagrams is consistent with the benefit and cost figures listed below? Please explain how you know.

Year

0

1

2

3

Benefits

$0

$40

$40

$40

Costs

$50

$20

$20

$20

B. For each of the three diagrams shown above, explain how you would decide whether or not the project should be done. For each of your answers, please include the term “internal rate of return.”

Year

0

1

2

3

Benefits

$0

$40

$40

$40

Costs

$50

$20

$20

$20

Explanation / Answer

Go to the Bureau of Labor Statistics website (www.bls.gov/news.release/empsit.toc.htm (Links to an external site.)Links to an external site. [Insert the 'links to an external site' symbol]), and click on Employment Situation Summary for the most up-to-date summary of unemployment in the United States, or the Employment

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