of $200,000. In the first year, it will have $100,000 in net cash inflows (one year after the initial investment). In year 2, it will have cash inflows of $100,000 (two years after the initial investment), and in year 3 the project will generate $200,000 (three years after the initial investment). ...
Started on Tuesday, 10 December 2019, 6:45 PM
State Finished
Completed on Tuesday, 10 December 2019, 8:03 PM
Time taken 1 hour 18
mins
Marks 30.00/40.00
Grade 210.00 out of 280.00 (75%)
Question 1 A company is considering a project that has a discount rate of 5%. It will require
Correct an initial investment of $200,000. In the first year, it will have $100,000 in net
cash inflows (one year after the initial investment). In year 2, it will have cash
Mark 1.00 out of inflows of $100,000 (two years after the initial investment), and in year 3 the
project will generate $200,000 (three years after the initial investment). What is
1.00 the project's NPV? Assume all cash flows occur at the end of the year.
FNA Select one:
N522 a. $190,476
b. $358,708
- c. $158,709
020_ d. $193,204
860-
2020 The correct answer is: $158,709
20 A project has an initial investment requirement of $100,000. In year 1, it should
earn
$25,000; in year two, $30,000; and in year 3, $50,000. What is the project's
internal rate of return? Assume the cash flows in years one, two, and three
happen at the end of the year.
Select one:
a. 5.0%
b. 6.21%
c. 7.56%
d. 2.21%
The correct answer is: 2.21%
Question 2
Incorrect
Mark 0.00 out
of 1.00
,Question 3
In which of the following situations would it be appropriate to use the IRR
Correct method to make an investment decision?
Mark 1.00 out
of 1.00 Select one:
a. To compare two projects that have an equal initial
investment and lifespan.
b. All of these answers.
c. To assess a project which cash flows fluctuate between
positive and negative.
d. To compare two investments that have different durations.
The correct answer is: To compare two projects that have an equal initial
investment and lifespan.
Question 4
Under the internal rate of return rule in capital budgeting, which of the following
Incorrect statements CANNOT be true?
Mark 0.00 out
of 1.00 Select one:
a. The internal rate of return can vary throughout the life of a
project.
b. The internal rate of return can be equal to the cost of capital.
c. The cash inflows can be estimates.
d. The initial investment can be the cost from purchasing new
equipment.
The correct answer is: The internal rate of return can vary throughout the life of a
project.
, Question 5
You have just been offered a contract worth $5.6 million per year for 3 years.
Correct
However, to take the contract, you will need to purchase some new equipment.
Mark 1.00 out Your discount rate for this project is 15.3%. You are still negotiating the
of 1.00 purchase price of the equipment. What is the most you can pay for the
equipment and still have a positive NPV?
Select one:
a. $12.6 million
b. $16.8 million
c. $5.6 million
d. $23.4 million
The correct answer is: $12.6 million
Question 6 Which of the following could be a sunk
Correct
Mark 1.00 out cost? Select one:
of 1.00 a. All of these answers.
b. A feasibility study that attempted to determine the economic
viability of a project.
c. Labor hours spent on planning project.
d. Equipment purchased to pursue a project.
The correct answer is: All of these answers.
Question 7 Which of the following is an example of an opportunity
Correct
Mark 1.00 out cost? Select one:
of 1.00 a. If you watch a game instead of going for a run, the cost
is poorer personal health.
b. All of these answers.
c. If you buy a candy bar instead of a soda, the cost is thirst.
d. If invest in one of two projects, the cost is the lost revenue
from the other project.
The correct answer is: All of these answers.
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