## (Solution Download) 2. value: 1.00 points An investment project costs \$10,000 and has annual cash flows of \$2,800 for si

2.

value:

1.00 points

 An investment project costs \$10,000 and has annual cash flows of \$2,800 for six years.

 What is the discounted payback period if the discount rate is zero percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

 Discounted payback period years

 What is the discounted payback period if the discount rate is 4 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

 Discounted payback period years

 What is the discounted payback period if the discount rate is 21 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

 Discounted payback period years

3.

value:

1.00 points

 A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows:

 Year Cash Flow 0 A????1\$ 28,300 1 12,300 2 15,300 3 11,300

 If the required return is 14 percent, what is the IRR for this project? (Round your answer to 2 decimal places. (e.g., 32.16))

 IRR %

Should the firm accept the following project?

 Yes No

4.

value:

1.00 points

 A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:

 Year Cash Flow 0 A????1\$ 28,500 1 12,500 2 15,500 3 11,500

 What is the NPV for the project if the required return is 10 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 NPV \$

At a required return of 10

percent, should the firm accept this project?

 No Yes

 What is the NPV for the project if the required return is 26 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 NPV \$

At a required return of 26

percent, should the firm accept this project?

Yes

No

5.

value:

1.00 points

 A project that provides annual cash flows of \$17,900 for nine years costs \$85,000 today.

 What is the NPV for the project if the required return is 8 percent? (Round your answer to 2 decimal places. (e.g., 32.16))

 NPV \$

At a required return of 8 percent, should the firm accept this

project?

 Accept Reject

 What is the NPV for the project if the required return is 20 percent? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))

 NPV \$

At a required return of 20 percent, should the firm accept this

project?

 Accept Reject

 At what discount rate would you be indifferent between accepting the project and rejecting it? (Round your answer to 2 decimal places. (e.g., 32.16))

 Discount rate %

6.

value:

1.00 points

 Garage, Inc., has identified the following two mutually exclusive projects:

 Year Cash Flow (A) Cash Flow (B) 0 A????1\$ 29,100 A????1\$ 29,100 1 14,500 4,350 2 12,400 9,850 3 9,250 15,300 4 5,150 16,900

 a-1 What is the IRR for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

 IRR Project A % Project B %

a-2

Using the IRR decision rule, which project should the company

accept?

 Project A Project B

a-3Is this decision necessarily

correct?

 Yes No

 b-1 If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

 NPV Project A \$ Project B \$

b-2Which project will the company

choose if it applies the NPV decision rule?

 Project A Project B

 c. At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 Discount rate %

7.

value:

1.00 points

 Year Cash Flow 0 A????1\$ 19,000 1 11,300 2 10,200 3 6,700

 What is the profitability index for the set of cash flows if the relevant discount rate is 11 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161))

 Profitability index

 What is the profitability index for the set of cash flows if the relevant discount rate is 16 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161))

 Profitability index

 What is the profitability index for the set of cash flows if the relevant discount rate is 23 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161))

 Profitability index

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