1. Southeast Compositions, Inc. is considering a project with the following cash flows:

Initial Outlay = $126,000

Cash Flows: Year 1 = $44,000

Year 2 = $59,000

Year 3 = $64,000

Compute the net present value of this project if the company's discount rate is 14%.

Select one:

a. $239,209

b. $725,000

c. -$138,561

d. -$249,335

2.

The Net Present Value (or NPV) criteria for capital budgeting decisions assumes that expected future cash flows are reinvested at ________, and the Internal Rate of Return (or IRR) criteria assumes that expected future cash flows are reinvested at ________.

Select one:

a. the internal rate of return; the firm's discount rate

b. the firm's discount rate; the internal rate of return

c. the internal rate of return; the internal rate of return

d. Neither criteria assumes reinvestment of future cash flows.

3.

Which of the following statements is MOST correct?

Select one:

a. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV.

b. A project with a NPV = 0 is not acceptable.

c. If a project's internal rate of return (IRR) exceeds the required return, then the project's net present value (NPV) must be negative.

d. The IRR calculation implicitly assumes that all cash flows are reinvested at a rate of return equal to the IRR.

4.

Lithium, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. Lithium, Inc.'s required rate of return for these projects is 10%. The equivalent annual annuity amount for project A is

Select one:

a. $12,989.

b. $18,532

c. $13,357.

d. $15,024.

5.