chapter 11
A company's weighted average cost of capital is 11.7% per year. Which of the following mutually exclusive projects should it pursue?
3 because it has the highest positive net present value.
A company's weighted average cost of capital is 12.8% per year. Which of the following independent projects should it pursue?
3 because its IRR is greater than the cost of capital.
A company's weighted average cost of capital is 12.4% per year. Which of the following independent projects should it not pursue?
1 and 3 because they have negative net present values.
A company's weighted average cost of capital is 12.1% per year. Which of the following mutually exclusive projects should it pursue?
1 because only its IRR is greater than the cost of capital.
A company's weighted average cost of capital is 11.3% per year. A project requires an investment of $20,000 today and it will generate after-tax cash flows of $10,000 at the end of year 1, $5,000 at the end of year 2, $5,000 at the end of year 3, and $3,000 at the end of year 4. What is the project's payback period?
10,000 + 5,000 + 5,000 = 20,000, so 3 years of cash flow are required to recover the amount invested
A company's weighted average cost of capital is 10.3% per year. Which of the following independent projects should it pursue?
2 and 3 because they have positive net present values.
A company's weighted average cost of capital is 10.4% per year. Which of the following mutually exclusive projects should it pursue?
3 because it has the highest positive net present value.
A project requires an investment of $55,000 today and it will generate after-tax cash flows of $32,000 at the end of year 1, $23,000 at the end of year 2, $15,000 at the end of year 3, and $7,000 at the end of year 4. The company's weighted average cost of capital is 9.9% per year. What is the project's payback period?
32,000 + 23,000 = 55,000, so 2 years of cash flow are required to recover the amount invested
A company's weighted average cost of capital is 14.1% per year. Which of the following mutually exclusive projects should it not pursue?ProjectNPVA$152B$286C-$189D-$34
341Only B should be pursued because it has the highest positive NPV.
A company's weighted average cost of capital is 11.1% per year. Which of the following mutually exclusive projects should it pursue?
4 should be pursued because it has the highest positive net present value.
A project requires an investment of $25,000 today and it will generate after-tax cash flows of $7,000 at the end of year 1, $9,000 at the end of year 2, $4,000 at the end of year 3, and $5,000 at the end of year 4. The company's weighted average cost of capital is 10.9% per year. What is the project's payback period?
7,000 + 9,000 + 4,000 + 5,000= 25,000, so 4 years of cash flow are required to recover the amount invested
A project requires an investment of $200,000 today and it will generate after-tax cash flows of $90,000 at the end of year 1, $60,000 at the end of year 2, $50,000 at the end of year 3, and $30,000 at the end of year 4. The company's weighted average cost of capital is 10.2% per year. What is the project's payback period?
90,000 + 60,000 + 50,000 = 200,000, so 3 years of cash flow are required to recover the amount invested
A company's weighted average cost of capital is 11.7% per year. Which of the following independent projects should it pursue?ProjectA$252 B$386 C-$289 D-$54
A and B because they have positive net present value
A project requires an investment of $1,200 today and it will generate after-tax cash flows of $400 at the end of year 1, $500 at the end of year 2 and, $700 at the end of year 3. The company's weighted average cost of capital is 12.1% per year. What is the project's annual internal rate of return?
CF0 = -1,200, CF1 = 400, CF2 = 500, CF3 = 700, IRR CPT = 14.4
A company's weighted average cost of capital is 11.3% per year. A project requires an investment of $700,000 today and it will generate after-tax cash flows of $250,000 at the end of year 1, $400,000 at the end of year 2, $130,000 at the end of year 3, and $80,000 at the end of year 4. What is the project's annual internal rate of return?
CF0 = -700,000, CF1 = 250,000, CF2 = 400,000, CF3 = 130,000, CF4 = 80,000, IRR CPT = 10.8%
A project requires an investment of $40,000 today and it will generate after-tax cash flows of $10,000 at the end of year 1, $15,000 at the end of year 2, $20,000 at the end of year 3, and $20,000 at the end of year 4. If the company's weighted average cost of capital is 11.8% per year, what is the project's annual modified internal rate of return?
FV = 10,000(1.1183) + 15,000(1.1182) + 20,000(1.118) + 20,000 = 75,083 FV = 75,083, PV = -40,000, N = 4, PMT = 0, CPT I = 17.0
A project requires an investment of $600,000 today and it will generate after-tax cash flows of $150,000 at the end of year 1, $250,000 at the end of year 2, and $350,000 at the end of year 3. The company's weighted average cost of capital is 10.9% per year. What is the project's annual modified internal rate of return?
FV = 150,000(1.1092) + 250,000(1.109) + 350,000 = 811,732 FV = 811,732, PV = -600,000, N = 3, PMT = 0, CPT I = 10.6
A project requires an investment of $600,000 today and it will generate after-tax cash flows of $250,000 at the end of year 1, $300,000 at the end of year 2, and $200,000 at the end of year 3. The company's weighted average cost of capital is 8.7% per year. What is the project's annual modified internal rate of return?
FV = 250,000(1.08722^2) + 300,000(1.087) + 200,000 = 821,492 FV = 821,492, PV = -600,000, N = 3, PMT = 0, CPT I = 11.0
A project requires an investment of $10,000 today and it will generate after-tax cash flows of $3,000 at the end of year 1, $5,000 at the end of year 2, and $8,000 at the end of year 3. The company's weighted average cost of capital is 12.6% per year. What is the project's annual modified internal rate of return?
FV = 3,000(1.1262) + 5,000(1.126) + 8,000 = 17,434 FV = 17,434, PV = -10,000, N = 3, PMT = 0, CPT I = 20.4
A company's weighted average cost of capital is 8.7% per year. A project requires an investment of $12,000 today and it will generate after-tax cash flows of $4,000 at the end of year 1, $6,000 at the end of year 2, and $8,000 at the end of year 3. What is the project's annual modified internal rate of return?
FV = 4,000(1.0872) + 6,000(1.087) + 8,000 = 19,248 FV = 19,248, PV = -12,000, N = 3, PMT = 0, CPT I = 17.1
A company's weighted average cost of capital is 9.4% per year. A project requires an investment of $15,000 today and it will generate after-tax cash flows of $9,000 at the end of year 1, $5,000 at the end of year 2, and $4,000 at the end of year 3. What is the project's annual modified internal rate of return?
FV = 9,000(1.0942) + 5,000(1.094) + 4,000 = 20,242 FV = 20,242, PV = -15,000, N = 3, PMT = 0, CPT I = 10.5
A company's weighted average cost of capital is 8.0% per year. A project requires an investment of $300,000 today and it will generate after-tax cash flows of $5,500 per month for the next six years. What is the project's net present value?
Hide Feedback PMT = 5,500, N = 6x12 = 72, I = 8.0/12 = 0.67, FV = 0, CPT PV = 313,341 NPV = 313,341 - 300,000 = 13,341
A project requires an investment of $2,000 today and it will generate after-tax cash flows of $700 at the end of year 1, $800 at the end of year 2 and, $900 at the end of year 3. The company's weighted average cost of capital is 7.7% per year. What is the project's net present value
NPV = -2,000 + 700/1.077 + 800/1.0772 + 900/1.0773 = 60.1
A project requires an investment of $2,000 today and it will generate after-tax cash flows of $700 at the end of year 1, $800 at the end of year 2 and, $900 at the end of year 3. The company's weighted average cost of capital is 7.7% per year. What is the project's net present value?
NPV = -2,000 + 700/1.077 + 800/1.0772 + 900/1.0773 = 60.1
A company's weighted average cost of capital is 9.5% per year. A project requires an investment of $4.9 million today and it will generate after-tax cash flows of $1.7 million at the end of year 1, $2.4 million at the end of year 2 and, $3.3 million at the end of year 3. What is the project's net present value?
NPV = -4,900,000 + 1,700,000/1.095 + 2,400,000/1.0952 + 3,300,000/1.0953 = 1,167,595
A project requires an investment of $40,200 today and it will generate after-tax cash flows of $23,400 at the end of year 1, $17,500 at the end of year 2 and, $11,600 at the end of year 3. The company's weighted average cost of capital is 11.9% per year. What is the project's net present value?
NPV = -40,200 + 23,400/1.119 + 17,500/1.1192^2 + 11,600/1.1193^3 = 2,966
A company's weighted average cost of capital is 9.3% per year. A project requires an investment of $400,000 today and it will generate after-tax cash flows of $75,000 at the end of year 1, $100,000 at the end of year 2, $125,000 at the end of year 3, and $150,000 at the end of year 4. What is the project's net present value?
NPV = -400,000 + 75,000/1.093 + 100,000/1.0932 + 125,000/1.0933 + 150,000/1.0934 = -46,843
A project requires an investment of $470,000 today and it will generate after-tax cash flows of $215,000 at the end of year 1, $145,000 at the end of year 2, $110,000 at the end of year 3, and $180,000 at the end of year 4. If the company's weighted average cost of capital is 9.3% per year, what is the project's net present value?
NPV = -470,000 + 215,000/1.093 + 145,000/1.0932 + 110,000/1.0933 + 180,000/1.0934 = 58,446
A company's weighted average cost of capital is 12.3% per year. A project requires an investment of $700,000 today and it will generate after-tax cash flows of $250,000 at the end of year 1, $400,000 at the end of year 2, $130,000 at the end of year 3, and $80,000 at the end of year 4. What is the project's net present value?
NPV = -700,000 + 250,000/1.123 + 400,000/1.1232 + 130,000/1.1233 + 80,000/1.1234 = -18,114
A company's weighted average cost of capital is 12.6% per year. Which of the following mutually exclusive projects should it pursue?None have an IRR greater than the cost of capital.
None have an IRR greater than the cost of capital.
A company's weighted average cost of capital is 14.1% per year. Which of the following mutually exclusive projects should it not pursue?
Only 2 should be pursued because it has the highest positive net present value.
A company's weighted average cost of capital is 9.6% per year. A project requires a capital investment of $80,000 today and its operating costs will be $1,000 per month for five years. What is the present value of the project's costs?
PMT = 1,000, N = 5x12 = 60, I = 9.6/12 = 0.80, FV = 0, CPT PV = 47,504 PV = 47,504 + 80,000 = 127,504
What is the net present value of a project that requires an investment of $4,000 today and will generate after-tax cash flows of $1,000 per year for the next six years? The company's weighted average cost of capital is 12.6% per year.
PMT = 1,000, N = 6, I = 12.6, FV = 0, CPT PV = 4,042.5 NPV = 4,042.5 - 4,000 = 42.5
A project requires an investment of $55,000 today and it will generate after-tax cash flows of $1,500 per month for the next four years. The company's weighted average cost of capital is 8.4% per year. What is the project's annual modified internal rate of return?
PMT = 1,500, N = 4x12 = 48, I = 8.4/12 = 0.7, PV = 0, CPT FV = 85,222 FV = 85,222, PV = -55,000, N = 48, PMT = 0, CPT I = 0.92 Annualize; 0.92(12) = 11.0
A company's weighted average cost of capital is 10.9% per year. A project requires a capital investment of $26,000 today and its operating costs will be $11,000 per year for seven years. What is the present value of the project's costs?
PMT = 11,000, N = 7, I = 10.9, FV = 0, CPT PV = 52,002 PV = 52,002 + 26,000 = 78,002
A project requires an investment of $375,000 today and it will generate after-tax cash flows of $125,000 per year for the next four years. What is the project's net present value, if the company's weighted average cost of capital is 15.8% per year?
PMT = 125,000, N = 4, I = 15.8, FV = 0, CPT PV = 351,174 NPV = 351,174 - 375,000 = -23,826
A company's weighted average cost of capital is 12.1% per year. A project requires a capital investment of $250,000 today and its operating costs will be $150,000 per year for six years. What is the present value of the project's costs?
PMT = 150,000, N = 6, I = 12.1, FV = 0, CPT PV = 614,968 PV = 614,968 + 250,000 = 864,968
A project requires an investment of $7.2 million today and it will generate after-tax cash flows of $2.3 million per year for the next six years. The company's weighted average cost of capital is 11.9% per year. What is the project's annual modified internal rate of return?
PMT = 2,300,000, N = 6, I = 11.9, PV = 0, CPT FV = 18,617,866 FV = 18,617,866, PV = -7,200,000, N = 6, PMT = 0, CPT I = 17.2
A project requires a capital investment of $66,000 today and its operating costs will be $21,000 per year for four years. What is the present value of the project's costs, if the company's weighted average cost of capital is 9.4% per yea
PMT = 21,000, N = 4, I = 9.4, FV = 0, CPT PV = 67,441PV = 67,441 + 66,000 = 133,4
A company's weighted average cost of capital is 9.6% per year. A project requires an investment of $950,000 today and it will generate after-tax cash flows of $250,000 per year for the next five years. What is the project's annual modified internal rate of return?
PMT = 250,000, N = 5, I = 9.6, PV = 0, CPT FV = 1,514,167 FV = 1,514,167, PV = -950,000, N = 5, PMT = 0, CPT I = 9.8
A project requires an investment of $700,000 today and it will generate after-tax cash flows of $320,000 per year for the next four years. The company's weighted average cost of capital is 10.8% per year. What is the project's annual modified internal rate of return?
PMT = 320,000, N = 4, I = 10.8, PV = 0, CPT FV = 1,502,693 FV = 1,502,693, PV = -700,000, N = 4, PMT = 0, CPT I = 21.0
A company's weighted average cost of capital is 10.4% per year. A project requires an investment of $1,200 today and it will generate after-tax cash flows of $400 per year for the next four years. What is the project's net present value
PMT = 400, N = 4, I = 10.4, FV = 0, CPT PV = 1,257NPV = 1,257 - 1,200 = 57.
A project requires an investment of $125,000 today and it will generate after-tax cash flows of $5,000 per month for the next three years. The company's weighted average cost of capital is 9.6% per year. What is the project's annual modified internal rate of return?
PMT = 5,000, N = 3x12 = 36, I = 9.6/12 = 0.8, PV = 0, CPT FV = 207,644 FV = 207,644, PV = -125,000, N = 36, PMT = 0, CPT I = 1.42 Annualize; 1.42(12) = 17.0
A company's weighted average cost of capital is 9.8% per year. A project requires an investment of $18,000 today and it will generate after-tax cash flows of $7,200 per year for the next three years. What is the project's net present value?
PMT = 7,200, N = 3, I = 9.8, FV = 0, CPT PV = 17,968.6 NPV = 17,968.6 - 18,000 = -31.4
A company's weighted average cost of capital is 11.7% per year. A project requires a capital investment of $50,000 today and its operating costs will be $75,000 per year for five years. What is the present value of the project's costs?
PMT = 75,000, N = 5, I = 11.7, FV = 0, CPT PV = 272,380 PV = 272,380 + 50,000 = 322,380
A project requires an investment of $300,000 today and it will generate after-tax cash flows of $9,000 per month for the next five years. The company's weighted average cost of capital is 12.0% per year. What is the project's annual modified internal rate of return?
PMT = 9,000, N = 5x12 = 60, I = 12.0/12 = 1.0, PV = 0, CPT FV = 735,027 FV = 735,027, PV = -300,000, N = 60, PMT = 0, CPT I = 1.50 Annualize; 1.50(12) = 18.0
A company's weighted average cost of capital is 10.7% per year. A project requires an investment of $1,300 today and it will generate after-tax cash flows of $450 per year for the next four years. What is the project's internal rate of return
PV = -1,300, PMT = 450, N = 4, FV = 0, CPT I = 14.4
A company's weighted average cost of capital is 10.7% per year. A project requires an investment of $1,300 today and it will generate after-tax cash flows of $450 per year for the next four years. What is the project's internal rate of return?
PV = -1,300, PMT = 450, N = 4, FV = 0, CPT I = 14.4
A company's weighted average cost of capital is 8.9% per year. A project requires an investment of $6,500 today and it will generate after-tax cash flows of $2,000 per year for the next four years. What is the project's internal rate of return?
PV = -6,500, PMT = 2,000, N = 4, FV = 0, CPT I = 8.9
A company's weighted average cost of capital is 14.3% per year. A project requires an investment of $6.6 million today and it will generate after-tax cash flows of $2.2 million per year for the next seven years. What is the project's payback period?
Payback period = 6,600,000/2,200,000 = 3
A project requires an investment of $720,000 today and it will generate after-tax cash flows of $120,000 per year for the next ten years. The company's weighted average cost of capital is 9.2% per year. What is the project's payback period?
Payback period = 720,000/120,000 = 6
