Question

2a.

Year	Cash Flow
0	–$7,400
1	3,000
2	3,500
3	3,400

  

Required:
(a)	What is the NPV at a discount rate of 0 percent?
	(Click to select)   $2,375   $2,425   $2,500.00   $2,575   $2,625

  

(b)	What is the NPV at a discount rate of 11 percent?
	(Click to select)   $648.31   $610.55   $660.9   $629.43   $597.96

  

(c)	What is the NPV at a discount rate of 24 percent?
	(Click to select)   $-921.11   $-875.06   $-948.75   $-967.17   $-974.61

(d)	What is the NPV at a discount rate of 29 percent?
	(Click to select)   $-1,317.98   $-1,345.72   $-1,456.71   $-1,428.97   $-1,387.35

2b.

Mahjong, Inc., has identified the following two mutually exclusive projects:

  

Year	Cash Flow (A)	Cash Flow (B)
0	–$37,200	–$37,200
1	19,570	7,060
2	15,070	13,560
3	12,570	20,050
4	9,570	24,050

  

Required:

(a)	What is the IRR for Project A?
	(Click to select)   23.01%   21.22%   23.46%   21.67%   22.34%

  

(b)	What is the IRR for Project B?
	(Click to select)   20.43%   22.59%   22.16%   21.51%   20.86%

  

(c)	If the required return is 12 percent, what is the NPV for Project A?
	(Click to select)   $7,096.43   $7,535.39   $6,950.11   $7,681.71   $7,315.91

  

(d)	If the required return is 12 percent, what is the NPV for Project B?
	(Click to select)   $9,184.85   $9,468.92   $9,752.99   $9,942.37   $8,995.47

  

(e)	At what discount rate would the company be indifferent between these two projects (i.e. what is the crossover rate)?
	(Click to select)   18.75%   20.3%   18.36%   19.91%   19.33%

2c.

Year	Cash Flow
0	−$7,300
1	4,900
2	2,900
3	3,400

  

Required :

(a)	What is the profitability index for the cashflows if the relevant discount rate is 9 percent?
	(Click to select)   $1.375   $1.349   $1.31   $1.244   $1.271

  

(b)	What is the profitability index for the cashflows if the relevant discount rate is 19 percent?
	(Click to select)   $1.155   $1.087   $1.121   $1.177   $1.065

  

(c)	What is the profitability index for the cashflows if the relevant discount rate is 26 percent?
	(Click to select)   0.965   1.016   0.985   1.067   1.046

Answer 1