16. What is the net present value of a project with the following cash flows and
ID: 2652144 • Letter: 1
Question
16.
What is the net present value of a project with the following cash flows and a required return of 13 percent?
$4,341.65
-$4,039.83
-$4,341.65
$4,039.83
-$7,722.98
17.
What is the internal rate of return on an investment with the following cash flows?
4.98 percent
30.22 percent
36.77 percent
12.26 percent
10.07 percent
18.
What is the profitability index for an investment with the following cash flows given a 6 percent required return?
1.15
1.29
0.87
0.77
1.06
19.
It will cost $4,500 to acquire a small ice cream cart. Cart sales are expected to be $3,700 a year for five years. After the five years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart?
0.24 years
4.11 years
6.08 years
1.22 years
0.82 years
20.
A project has an initial cost of $70,000 and a four-year life. The company uses straight-line depreciation to a book value of zero over the life of the project. The projected net income from the project is $2,800, $4,300, $4,900, and $4,500 a year for the next four years, respectively. What is the average accounting return?
23.57 percent
5.89 percent
42.86 percent
11.79 percent
8.48 percent
Year Cash Flow 0 –$48,400 1 13,950 2 37,530 3 3,350Explanation / Answer
1. NPV= Cash Inflows- Cash Outflows
=13950*.885+37530.783+3350.693-48400
= 12345.75+29386+2321.55-48400 = $ -4341.65
3.Cash Inflows
= 7700*.943+10000*.890+9400*.839
= 7261.1+8900+7866.6= 24027.7
PI = Cash Inflows/ Cash Outflows
=24027.7/21000 = 1.15
4. Outflow= 4500
Inflow per year = 3700
2nd year= 4500-3700=800
Payback period = 1+800/3700 = 1.22 years
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