Question

Answer 16, 17, and 18 using the following information:

Bill plans to open a do-it-yourself dog bathing center in a storefront. The bathing equipment will cost $50,000. Bill expects the after-tax cash inflows to be $15,000 annually for 8 years, after which he plans to scrap the equipment and retire to the beaches of Jamaica.

16.	What is the project's payback period?
A)	2.67 years
B)	3.33 years
C)	3.67 years
D)	4.33 years
E)	5.67 years

17.	Assume the required return is 10%. What is the project's NPV?
A)	$887
B)	$13,322
C)	$22,759
D)	$30,023.89
E)	$80,023.89

18.	Assume the required return is 20%. What is the project's IRR? Should it be accepted?
A)	14.95%;   yes
B)	15%;   no
C)	27%;   yes
D)	28%;   no
E)	None of the above

19.	Shareholders are also called the….
A)	Residual owners
B)	Proxy owners
C)	Stock exchange operators.
D)	junk investors
E)	None of the above

           

20.	A specialist on the New York Stock Exchange
A)	Is not allowed to make any profits
B)	Helps investors make as much money as possible
C)	Is ready to sell and buy stocks in which he specializes in order to maintain orderly market conditions.
D)	Can borrow funds from shareholders
E)	None of the above

Answer 1