Objective type questions on payback period, npv and irr

Reference no: EM1314177

Objective type questions on payback period, NPV and IRR

Strange Manufacturing Company is purchasing a production facility at a cost of $21 million. The firm expects the project to generate annual cash flows of $7 million over the next five years. Its cost of capital is 18 percent.

1. What is the payback period for this project?

a. 2.8 years

b. 3.0 years

c. 3.2 years

d. 3.4 years

2. What is the discounted payback period for this project?

a. 3.9 years

b. 4.3 years

c. 4.7 years

d. 5.1 years

3. What is the net present value of this project?

a. $890,197

b. $1,213,909

c. $905,888

d. $777,713

4. What is the internal rate of return on this project? (Round to the nearest percent.)

a. 17%

b. 18%

c.19%

d. 20%

Reference no: EM1314177

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