33. If the returns on Stock A are as follows: Year 1 return = 9 %, Year 2 return

Question

33. If the returns on Stock A are as follows: Year 1 return = 9 %, Year 2 return = 31 %, Year 3 return = 6 %, Year 4 return = 25 %, and Year 5 return = 35 %, what is the average return for Stock A over this 5 year period? (Record your answer as a percent rounded to 1 decimal place. If your answer is negative, place a minus sign before your number with no space between the sign and the number. For example, record negative 14.284% as -14.3).

34, A firm is evaluating a project with an initial cost of $ 679,372 and annual cash inflows of $ 292,308 per year (first cash flow to be received exactly one year from today) for each of the next 5 years. If the cost of capital for this project is 12 %, what is this project's NPV?

Explanation / Answer

33)

the average return for Stock A over this 5 year period = (9 + 31 + 6 + 25 + 35) / 5 = 21.2 %

34)

project's NPV = annual cash inflow * PVIFA(12%,5) - initial cost

= $ 292,308 * 3.605 - $ 679,372 = $374398.34

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