Reference no: EM132490199

Question 1: A project being considered has an initial cost of 200 million pesos and will generate after-tax cash flows of 35 million pesos per year for 6 years. In addition, the project's assets can be sold at the end of year 6 and the after-tax proceeds will be 120 million. The required rate of return for the project is 6.0 percent. The project's profitability index is closest to:

a. 0.86

b. 1.25

c. 1.28

Question 2: Analysts should identify instances where payments to vendors are financed through third-party financial institutions because there have been instances where the cash outflow for repayments to these institutions have been classified as a(n):

a. financing activity

b. investing activity

c. operating cash flow activity.

Question 3: The following data is collected:

Years to maturity Spot rate (semiannual bond basis)

1.0 5.75%

2.0 6.25%

3.0 7.00%

Based on the above data, the 1-year implied forward rate 1 year from now is closest to:

a. 3.38%

b.6.75%

c.6.51%