HADM 2250 Prelim Review Questions
Click Link Below To Buy:
Contact Us:
Hwcoursehelp@gmail.com
1. What is the payback period for the set of cash flows given below?
Year
|
Cash Flow
|
0
|
–$5,500
|
1
|
1,300
|
2
|
1,500
|
3
|
1,900
|
4
|
1,400
|
2. An investment project provides cash inflows of $585 per year for eight years.
(a) What is the project payback period if the initial cost is $1,700? (b) What is the project payback period if the initial cost is $3,300? (c) What is the project payback period if the initial cost is $4,900?
3. Buy Coastal, Inc., imposes a payback cutoff of three years for its international investment projects.
Year
|
Cash Flow (A)
|
Cash Flow (B)
|
0
|
–$60,000
|
–$70,000
|
1
|
23,000
|
15,000
|
2
|
28,000
|
18,000
|
3
|
21,000
|
26,000
|
4
|
8,000
|
230,000
|
(a) What is the payback period for both projects? (b) Which project should the company accept?
4. An investment project has annual cash inflows of $3,200, $4,100, $5,300, and $4,500, and a discount rate of 14 percent.
(a) What is the discounted payback period for these cash flows if the initial cost is $5,900? (b) What is the discounted payback period for these cash flows if the initial cost is $8,000? (c) What is the discounted payback period for these cash flows if the initial cost is $11,000?
5. An investment project costs $10,000 and has annual cash flows of $2,900 for six years. (a) What is the discounted payback period if the discount rate is zero percent?
(b) What is the discounted payback period if the discount rate is 5 percent?
(c) What is the discounted payback period if the discount rate is 19 percent?
6. You’re trying to determine whether to expand your business by building a new manufacturing plant.
The plant has an installation cost of $12 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,854,300, $1,907,600, $1,876,000, and
$1,329,500 over these four years, what is the project’s average accounting return (AAR)?
7. A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows:
Year
|
Cash Flow
|
0
|
–$28,000
|
1
|
12,000
|
2
|
15,000
|
3
|
11,000
|
(a) If the required return is 14 percent, what is the IRR for this project? (b) Should the firm accept the following project?
8. A project that provides annual cash flows of $17,300 for nine years costs $79,000 today. (a) What is the NPV for the project if the required return is 8 percent?
(b) At a required return of 8 percent, should the firm accept this project? (c) What is the NPV for the project if the required return is 20 percent? (d) At a required return of 20 percent, should the firm accept this project?
(e) At what discount rate would you be indifferent between accepting the project and rejecting it?
9. A project has the following cash flows:
Year
|
Cash Flow
|
0
|
–$16,400
|
1
|
7,100
|
2
|
8,400
|
3
|
6,900
|
(a) What is the NPV at a discount rate of zero percent? (b) What is the NPV at a discount rate of 10 percent? (c) What is the NPV at a discount rate of 20 percent? (d) What is the NPV at a discount rate of 30 percent?
10. Consider the following two mutually exclusive projects:
Year
|
Cash Flow (X)
|
Cash Flow (Y)
|
0
|
–$20,000
|
–$20,000
|
1
|
8,850
|
10,100
|
2
|
9,100
|
7,800
|
3
|
8,800
|
8,700
|
(a) Calculate the IRR for each project.
(b) What is the crossover rate for these two projects?
(c) What is the NPV of Projects X and Y at discount rates of 0%, 15%, and 25%?
11. Consider the project with the following cash flows.
Year
|
Cash Flow
|
0
|
–$18,000
|
1
|
10,300
|
2
|
9,200
|
3
|
5,700
|
(a) What is the profitability index for the set of cash flows if the relevant discount rate is 10%? (b) What is the profitability index for the set of cash flows if the relevant discount rate is 15%? (c) What is the profitability index for the set of cash flows if the relevant discount rate is 22%?
12. The Angry Bird Corporation is trying to choose between the following two mutually exclusive design projects:
No comments:
Post a Comment