Reference no: EM132494716

Question 1. Scott Enterprises is considering a project that has the following cash flow and cost of capital (r) data. What is the project's NPV? Note that if a project's expected NPV is negative, it should be rejected.

r: 11.00%

Year: 0 1 2 3 4

Cash flows: -$1,000 $350 $350 $350 $350

a. $77.49 b. $90.15 c. $85.86 d. $94.66 e. $81.56

Question 2. Reed Enterprises is considering a project that has the following cash flow and cost of capital (r) data. What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected.

r: 10.00%

Year: 0 1 2 3

Cash flows: -$1,050 $450 $460 $470

a. $96.99 b. $92.37 c. $106.93 d. $112.28 e. $101.84

Question 3. Hart Corp. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the cost of capital or negative, in both cases it will be rejected.

Year:                     0      1       2        3

Cash flows: -$1,000   $425  $425   $425

a. 13.87% b. 13.21% c. 12.55% d. 15.29% e. 14.56%

Question 4. Nichols Inc. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's IRR can be less than the cost of capital or negative, in both cases it will be rejected.

Year:                    0         1          2        3       4              5

Cash flows: -$1,250      $325    $325    $325     $325        $325

a. 9.91% b. 9.43% c. 10.92% d. 11.47% e. 10.40%

Question 5. Computer Consultants Inc. is considering a project that has the following cash flow and cost of capital (r) data. What is the project's MIRR? Note that a project's MIRR can be less than the cost of capital (and even negative), in which case it will be rejected.

r: 10.00%

a. 10.35% b. 9.32% c. 12.78% d. 14.20% e. 11.50%

Question 6.  Worthington Inc. is considering a project that has the following cash flow data. What is the project's payback?

Year: 0 1 2 3

Cash flows: -$500 $150 $200 $300

a. 2.25 years b. 2.75 years c. 3.03 years d. 2.03 years e. 2.50 years

Question 7. Craig's Car Wash Inc. is considering a project that has the following cash flow and cost of capital (r) data. What is the project's discounted payback?

r: 10.00%

Year: 0 1 2 3

Cash flows: -$900 $500 $500 $500

a. 1.88 years b. 2.29 years c. 2.52 years d. 2.78 years e. 2.09 years

Question 8. You have just landed an internship in the CFO's office of Hawkesworth Inc. Your first task is to estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow?

Sales revenues $13,000

Depreciation $4,000

Other operating costs $6,000

Tax rate 25.0%

a. $6,566 b. $6,899 c. $6,250 d. $6,731 e. $6,406

Question 9.  Your new employer, Freeman Software, is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, and the allowed depreciation rates for such property are 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project's 10-year expected life. What is the Year 1 cash flow?

Equipment cost (depreciable basis) $65,000

Sales revenues, each year $60,000

Operating costs (excl. deprec.) $25,000

Tax rate 25.0%

a. $31,666 b. $36,869 c. $35,114 d. $31,849 e. $33,442

Question 10. Century Roofing is thinking of opening a new warehouse, and the key data are shown below. The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new warehouse. The equipment for the project would be depreciated by the straight-line method over the project's 3-year life, after which it would be worth nothing and thus it would have a zero salvage value. No new working capital would be required, and revenues and other operating costs would be constant over the project's 3-year life. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.)

Project cost of capital (r) 10.0%

Opportunity cost $100,000

Net equipment cost (depreciable basis) $65,000

Straight-line deprec. rate for equipment 3.333%

Sales revenues, each year $123,000

Operating costs (excl. deprec.), each year $25,000

Tax rate 25%

a. $31,254 b. $26,796 c. $28,207 d. $32,817 e. $29,691