Reference no: EM132622424

Questions -

Q1. If the calculated NPV is negative, then which of the following must be true? The discount rate used is:

a. too high

b. too low

c. greater than the internal rate of return

d. equal to the internal rate of return

e. less than the internal rate of return

Q2. A local electricity generating company is considering two alternative ways to meet its electricity demand. The first alternative is to build coal-fired plant (project C) at a cost of $1000 million. This plant would have a life of 20 years and would provide after tax net flows of $120 million per year over its life. The second alternative is to build a gas-fired plant (plan G) that would cost $400 million and would produce after tax net cash flows of $68 million per year for 10 years after the plant would have to be replaced. The plan is to supply the power needed for exactly 20 years and if inflation and productivity gains are expected to offset one another so as to leave expected cost and cash flows contact over 20 years period. The cost of capital for either plant is 10 present. What is the NPV of the coal fired plant (project C) over twenty years life?

Q3. The primary goal of the financial management is to:

a. maximize market share

b. minimize costs

c. maximize current sales

d. minimize the value of shares