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Which one of the following projects should you accept?

a. A project with an IRR of 11.6 percent and a required return of 11.5 percent.
b. A project with an NPV of -$3,091.
c. A project with a PI of 0.87.
d. A project with a payback period of 2.6 years and a required period of 2.5 years.

What do you know for certain about two mutually exclusive projects if their NPVs both plot exactly at the crossover point on an NPV profile graph?

a. Both projects have a zero NPV.
b. Neither project is acceptable.
c. Both projects should be accepted.
d. You are indifferent between the two projects.
Which one of the following must equal zero if a project’s IRR is used as the discount rate for the project?

a. PI
b. payback period
c. AAR
d. NPV

 

A project has an initial cost of $16,000 and a 4-year life. The cash inflows are: year 1 = $7,000, year 2 = $8,400, year 3 = $3,600, and year 4 = $3,000. What is the value of the PI if the required return is 12 percent?

a. 0.88
b. 0.96
c. 1.09
d. 1.24

 

A project has a required return of 14.25 percent. The project’s initial cost is $13,000 and its cash flows are: year 1 = $3,800, year 2 = $8,000, and year 3 = $5,000. What is the project’s IRR?

a. 13.40 percent
b. 13.72 percent
c. 14.25 percent
d. 14.48 percent

Winter Wear is considering a 5-year project with an initial cost of $211,000. The project will produce cash inflows of $56,500 a year over the life of the project . What is the net present value if the required rate of return is 15.8 percent?

a. -$32,407.16
b. -$25,136.01
c. $28,874.31
d. $31,406.17

 

Which one of the following methods of analysis is most suited to analyzing mutually exclusive projects with differing initial costs?

a. PI
b. AAR
c. IRR
d. NPV

The Candy Hut is considering a project with an initial cost of $6,500. The project will produce cash flows of: $2,000 in year 1, $2,200 in year 2, $2,400 in year 3, and $2,500 in year 4. What is the payback period?

a. 2.87 years
b. 2.96 years
c. 3.47 years
d. 3.96 years

You are considering two mutually exclusive projects. Project A costs $3.6 million, has a required return of 14.5 percent, and an IRR of 14.3 percent. Project B costs $4.1 million, has a required return of 16 percent, and an IRR of 15.6 percent. Which project(s) should be accepted?

a. project A only
b. project B only
c. both A and B
d. neither A nor B

A project produces cash inflows of $7,200 a year for 3 years. The PI is 1.02 at a discount rate of 14 percent. What is the initial cost of the project?

a. $15,887.78
b. $16,109.98
c. $16,387.99
d. $17,202.10