Finance Net Present Value Quiz QUESTION TEXT To the nearest dollar, what is the net present value of a replacement project whose cash flows are -$104,000;
Finance Net Present Value Quiz QUESTION TEXT
To the nearest dollar, what is the net present value of a replacement project whose cash flows are -$104,000; $30,000; $69,000; and $55,000 for years 0 through 3, respectively? The firm has decided to assume that the appropriate cost of capital is 10%.
Select one:
A. $21,620
B. $19,654
C. $20,008
D. $30,999
QUESTION TEXT
An example of a contingent product is:
Select one:
A. choosing between one of two manufacturing sites.
B. building a new manufacturing plant with optional waste recycling.
C. adding manufacturing capacity to a plant.
D. None of the above.
QUESTION TEXT
Two projects have the same initial cost.
Project A has estimated cash flows of $1,000, $2,000, $3,000, $4,000 at the end of years 1 to 4 respectively.
Project B has estimated cash flows of $4,000, $3,000, $2,000, $1,000 at the end of years 1 to 4 respectively.
Which project will have the greater NPV assuming a positive discount rate?
Select one:
a. The NPV will be the same for both Project A and Project B
b. Project B
c. Project A
d. Cannot determine from the information given.
QUESTION TEXT
Albury Company is adding a new assembly line at a cost of $8.5 million. The company expects the project to generate cash flows of $2 million, $3 million, $4 million, and $5 million over the next four years. Its cost of capital is 16 percent. What is the net present value of this project?
Select one:
A. $1,213,909
B. $905,888
C. $777,713
D. $645,366
QUESTION TEXT
The cost of capital is:
Select one:
A. the minimum return that a capital budgeting project must earn for it to be accepted.
B. the maximum return a project can earn.
C. the return that a previous project for the company had earned.
D. none of the above.
QUESTION TEXT
A company is in the process of constructing a new plant at a cost of $14 million. It expects the project to generate cash flows of $10 million, $7 million, and $10 million over the next three years. The cost of capital is 14.5 percent p.a. What is the net present value of this project? (in millions to three decimals)
Select one:
a. $6.735
b. $34.735
c. $4.109
d. $7.509
QUESTION TEXT
Indicate whether True or False.
If we know that at rate i p.a. Project A has a greater NPV than Project B then we can conclude with certainty that at rate j p.a., where j is greater than i, Project A will also have a greater NPV.
Select one:
a. True
b. False
QUESTION TEXT
The net present value (NPV):
Select one:
A. uses the discounted cash flow valuation technique.
B. will provide a direct measure of how much the company value will change because of the capital project.
C. is consistent with shareholder wealth maximisation goals.
D. all of the above.
QUESTION TEXT
A company is considering an investment that will cost $753,000 and have a useful life of 4 years. The cash flows from the project are expected to be $543,000 per year in the first two years then $159,000 per year for the last 2 years. If the appropriate discount rate is 15.0 percent per annum, what is the NPV of this investment (to the nearest dollar)?
Select one:
a. $325214
b. $1831214
c. $361308
d. $388248
QUESTION TEXT
Barcode Biz has invested in new machinery at a cost of $1,450,000. This investment is expected to produce cash flows of $640,000, $715,250, $823,330, and $907,125 over the next four years. What is the payback period for this project (rounded to two decimal places)?
Select one:
A. 2.12 years
B. 1.88 years
C. 4.00 years
D. 3.00 years.
