FNAN522 FINAL EXAM 2025/2026
QUESTIONS AND ANSWERS 100% PASS
$158,709 - ANS 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% - ANS 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:
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,a. 5.0%
b. 6.21%
c. 7.56%
d. 2.21%
To compare two projects that have an equal initial investment and
lifespan. - ANS 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. - ANS 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.
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, $12.6 million - ANS 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
d. $23.4 million
All of these answers. - ANS Which of the following could be a sunk cost?
Select one:
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.
All of these answers. - ANS Which of the following is an example of an opportunity cost?
Select one:
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.
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
QUESTIONS AND ANSWERS 100% PASS
$158,709 - ANS 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% - ANS 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:
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,a. 5.0%
b. 6.21%
c. 7.56%
d. 2.21%
To compare two projects that have an equal initial investment and
lifespan. - ANS 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. - ANS 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.
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, $12.6 million - ANS 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
d. $23.4 million
All of these answers. - ANS Which of the following could be a sunk cost?
Select one:
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.
All of these answers. - ANS Which of the following is an example of an opportunity cost?
Select one:
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.
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
