Question

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1.) What is the net present value of a project that has an initial cost of $40,000 and produces cash inflows of $8,000 a year for 11 years if the discount rate is 15 percent?

Group of answer choices

$798.48

$1869.69

$1240.23

$2470.01

2.) The Chicken Basket is considering a project with an initial cost of $20,000. The project will produce cashflows of: $6,700 in year 1, $6,300 in year 2, $5,000 in year 3, and $4,000 in year 4. What is the payback period?

Group of answer choices

3.33 years

3.05 years

3.50 years

3.26 Years

3.) The Black Horse is currently considering a project that will produce cash inflows of $12,000 a year for three years followed by $6,500 in year four. The cost of the project is $38,000. What is the profitability index if the discount rate is 7 percent?

Group of answer choices

1.09

0.96

0.99

1.29

4.) A firm is reviewing a project that has an initial cost of $71,000. The project will produce annual cash inflows, starting with year 1, of $8,000, $13,400, $18,600, $33,100 and finally in year five, $37,900. What is the profitability index if the discount rate is 11 percent?

Group of answer choices

1.02

1.07

0.98

0.92

5.) Which one of the following bonds is the least interest rate sensitive?

Group of answer choices

3-year, 0 percent coupon

6-year, 6 percent coupon

6-year, 0 percent coupon

3-year, 6 percent coupon

Answer #1

When the present value of the cash inflows exceeds the initial
cost of a project, then the project should be
Group of answer choices
accepted because the internal rate of return is positive
accepted because the profitability index is less than 1.
accepted because the profitability index is negative.
accepted because IRR is higher than the discount rate.
rejected because the net present value is negative

What will be the net present value of a project that provides
net cash flow of $20,000 at the end of the first year, $7,000 at
the end of the second year, and $13,000 at the end of the third
year? The initial cost is $8,000 and the appropriate discount rate
is 10%.
Tophill Corporation is considering a project that will pay
$10,000 at the end of the first year, $22,000 at the end of the
second year, and $40,000...

You are considering a project that has been assigned a discount
rate of 7 percent. If you start the project today, you will incur
an initial cost of $8,000 and will receive cash inflows of $4,550 a
year for two years. If you wait one year to start the project, the
initial cost will rise to $9,000 and the cash flows will increase
to $5,200 a year for two years. What is the value of the option to
wait?
Group...

If a project has a net present value equal to zero, then:
Group of answer choices the project earns a return exactly equal
to the discount rate.
the total of the cash inflows must equal the initial cost of the
project.
a decrease in the project's initial cost will cause the project
to have a negative NPV.
any delay in receiving the projected cash inflows will cause the
project to have a positive NPV.
the project's PI must be also...

QUESTION 12 The Black Horse is currently considering a project
that will produce cash inflows of $11,000 a year for three years
followed by $6,500 in Year 4. The cost of the project is $38,000.
What is the profitability index if the discount rate is 9 percent?
1.04 .93 .85 1.09 1.12

36. Setesh of Kanaan's new pyramid project has expected cash
inflows, starting with year 1, of $2,000, $4,000, $4,800 and
finally in year four, $8,300. The profitability index is 1.53 and
the discount rate is 11.4 percent. What is the initial cost of the
project?
35. What is the net present value of a project that has an
initial cost of $68,000 and produces cash inflows of $20,000 a year
for 10 years if the discount rate is 14.6 percent?

(Related to Checkpoint 11.1) (Net present value
calculation) Dowling Sportswear is considering building a new
factory to produce aluminum baseball bats. This project would
require an initial cash outlay of $5,500,000 and would generate
annual net cash inflows of $1,100,000 per year for 7 years.
Calculate the project's NPV using a discount rate of 5
percent.
If the discount rate is 5 percent, then the project's NPV is
$_______. (Round to the nearest dollar.)

A company is considering a project with an initial cost today of
$20,000. The project has a 3-year life with cash inflows of $5,500
a year. Should the company decide to wait one year to commence this
project, the initial cost will increase by 5 %, and the cash
inflows will increase by 6 % a year. Should the company decide to
wait two years to commence this project, the initial cost will
increase by 6 %, and the cash...

(Net present value calculation) Big Steve's, makers of
swizzle sticks, is considering the purchase of a new plastic
stamping machine. This investment requires an initial outlay of
$95,000 and will generate net cash inflows of $19,000 per year
for 11 years.
a. What is the project's NPV using a discount rate of 9
percent? Should the project be accepted? Why or why not?
b. What is the project's NPV using a discount rate of 13
percent? Should the project be...

All else constant, the net present value of a typical investment
project increases when:
Group of answer choices
The cost of capital increases.
Each cash inflow is delayed by one year.
The initial investment of a project increases.
The cost of capital decreases.
All cash inflows occur during the last year of a project’s life
instead of periodically throughout the life of the project.

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