Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
1) A company is planning to have a new 4 -year project. It will cost $10,000,000. Incremental Operating Cash Flow (OCF) from this project each
1) A company is planning to have a new 4 -year project. It will cost $10,000,000. Incremental Operating Cash Flow (OCF) from this project each year will be $3;000,000. The required retum is 10 percent and the required payback is 3 years.. Please answer the following questions (Q1-Q5) based on this information: Q1: What is the payback period? A) 4 B) It never pays back C) 3 D) 3.33 E) 2.5 2) What is the net present value of this project? A) 290,703.54 B) 490,403.66 C) 559,596.34 D) 59,509,596.34 E) 0 3) What is the profitability index (PI) for this project? A) 1 B) 1.3 C) 1.1 D) 0.8 E) 0.95 4) Which one is incorrect? A) IRR is smaller than the required return B) IRR is more than 5% but less than 10% C) NPV is negative in this question D) There are more than one IRR in this question E) The payback period is larger than required payback 5) Should we accept the project? A) We should accept B) We should reject 6) Which one of the following will decrease the net present value of a project? A) Increasing the amount of the final cash inflow B) Increasing the value of each of the project's discounted cash inflows C) Increasing the project's initial cost at time zero D) Decreasing the required discount rate
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started