Which project should you accept and why

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Reference no: EM131913103

1. A project will produce cash inflows of $3,200 a year for 4 years with a final cash inflow of $5,700 in year 5. The project's initial cost is $9,500. What is the net present value of this project if the required rate of return is 16 percent?

A. -$311.02
B. $2,168.02
C. $4,650.11
D. $9,188.98
E. $21,168.02

2. You are considering the following two mutually exclusive projects. The required rate of return is 14.6 percent for project A and 13.8 percent for project B. Which project should you accept and why?

A. project A; because it has the higher required rate of return
B. project A; because its NPV is about $4,900 more than the NPV of project B
C. project B; because it has the largest total cash inflow
D. project B; because it has the largest cash inflow in year one
E. project B; because it has the lower required return

3. You are considering two independent projects both of which have been assigned a discount rate of 15 percent. Based on the profitability index, what is your recommendation concerning these projects?

A. You should accept both projects.
B. You should reject both projects.
C. You should accept project A and reject project B.
D. You should accept project B and reject project A.
E. You should accept project A and be indifferent to project B.

4. It will cost $6,000 to acquire an ice cream cart. Cart sales are expected to be $3,600 a year for three years. After the three years, the cart is expected to be worthless as the expected life of the refrigeration unit is only three years. What is the payback period?
A. 1.48 years
B. 1.67 years
C. 1.82 years
D. 1.95 years
E. 2.00 years

Reference no: EM131913103

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