FINA Chapter 9 (Problems)

Your firm has a potential project that will cost $5,000 now to begin. The project will then generate after-tax cash flows of $144 at the end of the next three years and then $1,897 per year for the three years after that. If the discount rate is 9.11% then what is the NPV?

-946.72

What is the profitability index for Project A with a cost of capital of 8%? Year Project A Project B 0 ($42,000.00) ($45,000.00) 1 $14,000.00 $28,000.00 2 $14,000.00 $12,000.00 3 $14,000.00 $10,000.00 4 $14,000.00 $10,000.00 5 $14,000.00 $10,000.00

1.33

Your firm has a potential project that will cost $5,000 now to begin. The project will then generate after-tax cash flows of $900 at the end of the next three years and then $1400 per year for the three years after that. If the discount rate is 8% then what is the Profitability Index (PI)? NOTE: DON'T make CF0 negative when calculating Answer in % format with 2 number after the decimal point

103.67

Your firm has a potential project that will cost $5,000 now to begin. The project will then generate after-tax cash flows of $900 at the end of the next three years and then $1400 per year for the three years after that. If the discount rate is 8% then what is the NPV? NOTE: Don't forget to make CF0 NEGATIVE

183.48

What is the NPV of a project that costs $100,000.00 and returns $50,000.00 annually for three years if the opportunity cost of capital is 9.94%?

24,474.06

What is the NPV of a project that costs $100,000.00 and returns $50,000.00 annually for three years if the opportunity cost of capital is 7.99%?

28,878.10

Your firm has a potential project that will cost $5,000 now to begin. The project will then generate after-tax cash flows of $900 at the end of the next three years and then $1400 per year for the three years after that. What is the IRR? NOTE: Don't forget to make CF0 NEGATIVE

9.09%

Your firm has a potential project that will cost $5,000 now to begin. The project will then generate after-tax cash flows of $146 at the end of the next three years and then $1,817 per year for the three years after that. If the discount rate is 5.81% then what is the NPV?

-493.99

Your firm has a potential project that will cost $5,000 now to begin. The project will then generate after-tax cash flows of $315 at the end of the next three years and then $1,475 per year for the three years after that. If the discount rate is 5.91% then what is the NPV?

-832.26

A project costs $10,000 and will return cash flows of $2,500 in year 1, $6,500 in year 2, $3,000 in year 3, and $10,000 in year 4.. What is the IRR?

33.13%

Compute the payback period for a project that requires an initial outlay of $204,236 that is expected to generate $40,000 per year for 9 years.

5.11

What is the internal rate of return for a project with an initial outlay of $10,000 that is expected to generate cash flows of $2,000 per year for 6 years?

5.47%

A project costs $1,000 and will return cash flows of $50 in year 1, $3,800 in year 2, and a cost of $ 2,900 in year 3. What is the IRR?

7.39%

You are considering the following three mutually exclusive projects. The required rate of return for all three projects is 14%. Year A B C 0 $ (1,000) $(5,000) $(50,000) 1 $ 300 $ 1,700 $ 0 2 $300 $ 1,700 $15,000 3 $ 600 $1,700 $ 28,500 4 $300 $1,700 $ 33,000 What is the IRR of the best project? % terms to 2 decimal places w/o % sign

14.23

Compute the payback period for a project that requires an initial outlay of $153,425 that is expected to generate $40,000 per year for 9 years.

3.84