You are considering investing in a start up project at a cost of $100,000. You e

Question

You are considering investing in a start up project at a cost of $100,000. You expect the project to return $500,000 to you in seven years. Given the risk of this project, your cost of capital is 20% p.a. compounded annually. The IRR for this project is closest to:

20.00%

25.85%

15.60%

18.95%

2. What is the payback period for an investment with an initial outlay of $1m that has the following net cash inflows?: Year 1 $400,000, Year 2 $200,000 Year 3 $200,000, Year 4 $400,000

3.5 years

3.2 years

4 years

3 years

3. Consider the following project:

Year 0
Cash Flow

Year 1
Cash Flow

Year 2
Cash Flow

Year 3
Cash Flow

Year 4
Cash Flow

-73

30

30

30

30

15%

The NPV of project is closest to:

a 12.6

b 23.3

c 15.0

d 12.0

20.00%

25.85%

15.60%

18.95%

Explanation / Answer

1.B
2.A

3.C

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