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(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

0A????1$28,300
112,300
215,300
311,300

 

  

 

 

 

 

 

 

 

 

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

0A????1$28,500
112,500
215,500
311,500

 

  

 

 

 

 

 

 

 

 

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)

0A????1$29,100A????1$29,100
114,5004,350
212,4009,850
39,25015,300
45,15016,900

 

  

 

 

 

 

 

 

 

 

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

0A????1$19,000
111,300
210,200
36,700

 

  

 

 

 

 

 

 

 

 

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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