Question

1.Albury Company is adding a new assembly line at a cost of $8.5 million. The company expects the project to generate cash flows of $2 million, $3 million, $4 million, and $5 million over the next four years. Its cost of capital is 16 percent. What is the internal rate of return that Albury can earn on this project? (Round to the nearest percent.) HINT: Use a financial calculator or the Excel function: =IRR(values,[guess])

Select one:

A. 18%

B. 19%

C. 20%

D. 21%

2.In the next year, you expect Westpac shares have a 20% chance of earning 10 percent return, a 50% chance of earning only 2 percent and a 30% chance of earning -10 percent. Based on this, what is the standard deviation of Westpac's expected return?

Select one:

A. 7.211%

B. 0.520%

C. 0.000%

D. 5.311%

3.Jill purchased a piece of real estate one year ago for $630,000. The real estate is now worth $670,000. If Jill needs to have a total return of 11.7 per cent during the year, then what is the dollar amount of income that she needed to have to reach her objective? (to the nearest dollar; don’t use $ sign or commas)

4.

What is the net present value of a replacement project whose cash flows are -$871,000; $501,000; $776,000; and $126,000 for years 0 through 3, respectively? The firm has decided to assume that the appropriate cost of capital is 14.5% p.a. (round to the nearest dollar)

Select one:

a. $1984395

b. $101397

c. $328221

d. $242395

Answer 1

ANSWERS SUMMARY

1. 20%

2. 7.211%

3. 33710

4. 242395

QUESTION 3

current price P1=670000

previous price P0=630000

Let X be the dollar amoutn required

return= P1-P0+X/P0

0.117=670000-630000+X/630000

Dollar amount= 33710