FNAN522 FINAL EXAM | FROM PRACTICE TO
PERFECTION | GUARANTEED SUCCESS!
$158,709 - Answer: A company is considering a project that has a discount rate of 5%.
It will require 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 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 the project's NPV? Assume all cash flows occur at the end of
the year.
Select one:
a. $190,476
b. $358,708
c. $158,709
d. $193,204
2.21% - Answer: 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%
1
APPHIA - Crafted with Care and Precision for Academic Excellence.
, To compare two projects that have an equal initial investment and
lifespan. - Answer: In which of the following situations would it be appropriate to use the
IRR method to make
an investment decision?
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 internal rate of return can vary throughout the life of a project. - Answer: Under the
internal rate of return rule in capital budgeting, which of the following statements
CANNOT be true?
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.
$12.6 million - Answer: You have just been offered a contract worth $5.6 million per
year for 3 years.
However, to take the contract, you will need to purchase some new equipment.
Your discount rate for this project is 15.3%. You are still negotiating the
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
2
APPHIA - Crafted with Care and Precision for Academic Excellence.
PERFECTION | GUARANTEED SUCCESS!
$158,709 - Answer: A company is considering a project that has a discount rate of 5%.
It will require 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 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 the project's NPV? Assume all cash flows occur at the end of
the year.
Select one:
a. $190,476
b. $358,708
c. $158,709
d. $193,204
2.21% - Answer: 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%
1
APPHIA - Crafted with Care and Precision for Academic Excellence.
, To compare two projects that have an equal initial investment and
lifespan. - Answer: In which of the following situations would it be appropriate to use the
IRR method to make
an investment decision?
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 internal rate of return can vary throughout the life of a project. - Answer: Under the
internal rate of return rule in capital budgeting, which of the following statements
CANNOT be true?
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.
$12.6 million - Answer: You have just been offered a contract worth $5.6 million per
year for 3 years.
However, to take the contract, you will need to purchase some new equipment.
Your discount rate for this project is 15.3%. You are still negotiating the
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
2
APPHIA - Crafted with Care and Precision for Academic Excellence.
