Reference no: EM132364435

Question

1. A project will produce cash inflows of $3,200 every six months for 2 years with a final cash inflow of $5,700, 2 years after. The project's initial cost is $9,500, What is net present value of this project if the required rate of return is 6%?

a. $5,988.24

b. $7,516.58

c. $3,651.11

d. $8,551.71

e. $6,894.35

2. The company must invest in either project X or Y. The company knows that X and Y would have identical net present values if the financing rate is 9.1 %. The internal rate of return is 7.4 %  for project X and 8.5% for project Y. which of the following statements is most likely consistent with the net present value profile ?

a. if the company 's cost of capital is 10 % then Y has the highest NPV 

b. if the company 's cost of capital is 9.7 % then Y has the highest NPV 

c. if the company 's cost of capital is 8.6 % then Y has the highest NPV 

d. if the company 's cost of capital is 16 % then Y has the highest NPV

e. if the company 's cost of capital is 9 % then X has the highest NPV 

4. You are considering two mutually exclusive projects with the following cash flows. Will your choices between the two projects differ if the required rate of return is 12% rather than 14 % ? If so, what should you do? 

Year   Project A   Project B

   0.         -240.           -198

   1              30            90

   2.             30            110

   3.            270           12

a. Project B is better in both cases

b. Project A is better in both cases

c. Yes; select A at 12% and select neither at 14%

d. Yes; select A at 12% an B at 14%

e. Yes; select B at12 % and A at 14%

8. A company is considering a project that has an up-front cost part today at t=0. The project will generate positive cash flows of $65,000 a year at the end of each for the next 6 years. The projects NPV is $80,000 and the company's return on the project is 6 %.what is the project's payback?

a. 2.57 years 

b. 2.98 years 

c. 3.12 years 

d. 3.69 years 

e. 5.1 years