Northwest Industries is considering a project with the following cash flows: Ini

Question

Northwest Industries is considering a project with the following cash flows:

Initial Outlay = $2,800,000
After-tax operating cash fl ows for years 1-4 = $850,000 per year
Additional after-tax terminal cash fl ow at end of Year 4 = $125,000

Compute the net present value of this project if the company’s discount rate
is 14%.

a. $239,209
b. $725,000
c. -$138,561
d. -$249,335

Compute the payback period for a project with the following cash flows received uniformly within each year:
Initial Outlay = $100
Cash Flows: Year 1 = $40
                  Year 2 = $50
                  Year 3 = $60

a. 2.17 years
b. 3 years
c. 4 years
d. 3.17 years Northwest Industries is considering a project with the following cash flows:

Initial Outlay = $2,800,000
After-tax operating cash fl ows for years 1-4 = $850,000 per year
Additional after-tax terminal cash fl ow at end of Year 4 = $125,000

Compute the net present value of this project if the company’s discount rate
is 14%.

a. $239,209
b. $725,000
c. -$138,561
d. -$249,335

Compute the payback period for a project with the following cash flows received uniformly within each year:
Initial Outlay = $100
Cash Flows: Year 1 = $40
                  Year 2 = $50
                  Year 3 = $60

a. 2.17 years
b. 3 years
c. 4 years
d. 3.17 years

Explanation / Answer

Northwest Industries is considering a project with the following cash flows: Initial Outlay = $2,800,000 After-tax operating cash fl ows for years 1-4 = $850,000 per year Additional after-tax terminal cash fl ow at end of Year 4 = $125,000 Compute the net present value of this project if the company’s discount rate is 14%. d. -$249,335 Compute the payback period for a project with the following cash flows received uniformly within each year: Initial Outlay = $100 Cash Flows: Year 1 = $40 Year 2 = $50 Year 3 = $60 a. 2.17 years

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