Question

Corner Restaurant is considering a project with an initial cost of $211,600. The project will not produce any cash flows for the first three years. Starting in Year 4, the project will produce cash inflows of $151,000 a year for five years. This project is risky, so the firm has assigned it a discount rate of 18.6 percent. What is the project's net present value?

A) -$46,028.92 B) $39,487.15 C) -$38,399.55 D) $67,653.02 E) $18,715.97

Answer #1

Corner Restaurant is considering a project with an initial cost
of $211,600. The project will not produce any cash flows for the
first five years. Starting in Year 4, the project will produce cash
inflows of $151,000 a year for three years. This project is risky,
so the firm has assigned it a discount rate of 18.6 percent. What
is the project's net present value?
A) -$46,028.92 B) $39,487.15 C) -$38,399.55 D) $67,653.02 E)
$18,715.97

Jackie Chang’s
is considering a project with an initial cost of $231,400. the
project will not produce any cash flows for the first 2 years.
starting in year 3, the project will produce cash flows of $144,000
a year for 3 years. this project is risky, so the firm has assigned
it a discount rate of 16.5%. what’s the projects net present
value?
a.
$2,335.56
b. $122,585.57

The Blueberry Company is considering a project which will cost
$401 initially. The project will not produce any cash flows for the
first 3 years. Starting in year 4, the project will produce cash
inflows of $598 a year for 4 years. This project is risky, so the
firm has assigned it a discount rate of 20.3 percent. What is the
net present value?

The Blueberry Company is considering a project which will cost
$304 initially. The project will not produce any cash flows for the
first 3 years. Starting in year 4, the project will produce cash
inflows of $436 a year for 6 years. This project is risky, so the
firm has assigned it a discount rate of 21.4 percent. What is the
net present value?

Alpha Industries is considering a project with an initial cost
of $9.7 million. The project will produce cash inflows of $1.67
million per year for 9 years. The project has the same risk as the
firm. The firm has a pretax cost of debt of 6.12 percent and a cost
of equity of 11.61 percent. The debt–equity ratio is .77 and the
tax rate is 40 percent. What is the net present value of the
project?

Alpha Industries is considering a project with an initial cost
of $9.1 million. The project will produce cash inflows of $2.13
million per year for 6 years. The project has the same risk as the
firm. The firm has a pretax cost of debt of 6.15 percent and a cost
of equity of 11.63 percent. The debt–equity ratio is .78 and the
tax rate is 35 percent. What is the net present value of the
project?

Alpha Industries is considering a project with an initial cost
of $8.4 million. The project will produce cash inflows of $1.64
million per year for 8 years. The project has the same risk as the
firm. The firm has a pretax cost of debt of 5.73 percent and a cost
of equity of 11.35 percent. The debt–equity ratio is .64 and the
tax rate is 39 percent. What is the net present value of the
project?

Alpha Industries is considering a project with an initial cost
of $7.5 million. The project will produce cash inflows of $1.55
million per year for 7 years. The project has the same risk as the
firm. The firm has a pretax cost of debt of 5.46 percent and a cost
of equity of 11.17 percent. The debt–equity ratio is .55 and the
tax rate is 39 percent. What is the net present value of the
project?
$263,559
$482,364
$463,811
$397,552...

Alpha Industries is considering a project with an initial cost
of $8.4 million. The project will produce cash inflows of $1.56
million per year for 8 years. The project has the same risk as the
firm. The firm has a pretax cost of debt of 5.49 percent and a cost
of equity of 11.19 percent. The debt–equity ratio is .56 and the
tax rate is 40 percent. What is the net present value of the
project?
$400,549
$445,055
$462,857
$188,348...

Alpha Industries is considering a project with an initial cost
of $7.7 million. The project will produce cash inflows of $1.35
million per year for 9 years. The project has the same risk as the
firm. The firm has a pretax cost of debt of 5.52 percent and a cost
of equity of 11.21 percent. The debt–equity ratio is .57 and the
tax rate is 35 percent. What is the net present value of the
project?
Multiple Choice
$522,185
$346,351...

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