Reference no: EM133102231

Questions -

Q1. AZV Pty Ltd thinks about purchasing an equipment. The capital outlay is $550,000 and cost of capital is 10%. The equipment will be sold in overseas market at the end of year 5 for $50,000.

The following net operating cash flows is also given

Year 1 $100,000

Year 2 $200,000

Year 3 $150,000

Year 4 $230,000

Year 5 $400,000

What is the NPV for the equipment?

a. $224,357.19

b. $530,000

c. $580,000

d. $255,403.26

Q2. Discounted cash flow techniques recognise that:

a. $1 received in the future is equal to $1 received today.

b. none of the above options is correct

c. $1 received in the future is worth more than $1 received today.

d. $1 received in the future is worth less than $1 received today.

Q3. Jimmy's Tacos is considering investing $35 000 in a new 'pop-up' shop beside a popular Melbourne park. Jimmy estimates the net cash inflow will increase by $14,000 each year for the next 5 years. The payback period for the new taco shop is:

a. 3 years.

b. 2 years.

c. 2.5 years.

d. 3.5 years.

Q3. The two cash flow measures that overcome the time value of money problem are:

a. IRR and ARR.

b. NPV and IRR.

c. ARR and PP.

d. NPV and PP.

Q4. The major deficiency of the ARR method is:

a. It is easy and simple to understand and calculates

b. It ignores the importance of cash as the ultimate resource.

c. It does not take into account time value of money

d. Profits and costs are measured the same way