1 value 1 44 points The following are the cash flows of two projects Year Project A Project B 0 $400 $400 1 230 300 2 230 300 3 230 300 4 230 a If the opportunity cost of capital is 10 , calculate the NPV for both projects (Do not round intermediate calculations Round your answers to 2 decimal places ) Project NPV A $ B b Which of these projects is worth pursuing Project A Project B Both Neither 2 value 1 44 points The following are the cash flows of two projects Year Project A Project B 0 $270 $270 1 150 170 2 150 170 3 150 170 4 150 a Calculate the NPV for both projects if the discount rate is 12 (Do not round intermediate calculations Round your answers to 2 decimal places ) Project NPV A $ B b Suppose that you can choose only one of these projects Which would you choose Project A Project B Neither 4 value 1 44 points The following are the cash flows of two projects Year Project A Project B 0 $400 $400 1 230 300 2 230 300 3 230 300 4 230 a If the opportunity cost of capital is 10 , calculate the NPV for both projects (Do not round intermediate calculations Round your answers to 2 decimal places ) Project NPV A $ B b Which of these projects is worth pursuing Project A Project B Both Neither 4 value 1 44 points The following are the cash flows of two projects Year Project A Project B 0 $230 $230 1 110 130 2 110 130 3 110 130 4 110 What is the payback period of each project (Round your answers to 2 decimal places ) Project Payback Period A years B years 6 value 1 44 points A new computer system will require an initial outlay of $19,000, but it will increase the firms cash flows by $3,800 a year for each of the next 8 years a Calculate the NPV and decide if the system is worth installing if the required rate of return is 9 What if it is 14 (Negative amounts should be indicated by a minus sign Do not round intermediate calculations Round your answers to 2 decimal places ) Rate of Return NPV Worth Installing 9 $ (Click to select) Yes No 14 $ (Click to select) No Yes b How high can the discount rate be before you would reject the project (Do not round intermediate calculations Enter your answer as a percent rounded to 2 decimal places ) Maximum discount rate Hints References eBook Resources Hint 1 7 value 1 44 points Here are the cash flows for a project under consideration C 0 C 1 C 2 $ 7,660 $ 5,600 $ 19,440 a Calculate the projects net present value for discount rates of 0, 50 , and 100 (Leave no cells blank be certain to enter 0 wherever required Do not round intermediate calculations Round your answers to the nearest whole dollar ) Discount rate Net present value 0 $ 50 $ 100 $ b What is the IRR of the project (Do not round intermediate calculations Enter your answer as a whole percent ) IRR References WorksheetLe 8 value 1 44 points Consider projects A and B with the following cash flows C 0 C 1 C 2 C 3 A $ 43 $ 27 $ 27 $ 27 B 68 37 37 37 a 1 What is the NPV of each project if the discount rate is 10 (Do not round intermediate calculations Round your answers to 2 decimal places ) Project NPV A $ B $ a 2 Which project has the higher NPV Project A Project B b 1 What is the profitability index of each project (Do not round intermediate calculations Round your answers to 2 decimal places ) Project Profitability index A B b 2 Which project has the higher profitability index Project A Project B c 1 Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects Project A Project B c 2 Which project is most attractive to a firm that is limited in the funds it can raise Project A Project B Both rev 03 16 2015 9 value 1 48 points Here are the expected cash flows for three projects Cash Flows (dollars) Project Year 0 1 2 3 4 A 6,200 1,300 1,300 3,600 0 B 2,200 0 2,200 2,600 3,600 C 6,200 1,300 1,300 3,600 5,600 a What is the payback period on each of the projects Project Payback period A years B years C years b If you use a cutoff period of 2 years, which projects would you accept Project A Project B Project C Project A and Project B Project B and Project C Project A and Project C Projects A, B, and C None c If you use a cutoff period of 3 years, which projects would you accept Project A Project B Project C Project A and Project B Project B and Project C Project A and Project C Projects A, B, and C None d 1 If the opportunity cost of capital is 10 , calculate the NPV for projects A, B, and C (Negative amounts should be indicated by a minus sign Do not round intermediate calculations Round your answers to 2 decimal places ) Project NPV A $ B $ C $ d 2 Which projects have positive NPVs Project A Project B Project C Project A and Project B Project B and Project C Project A and Project C Projects A, B, and C None e Payback gives too much weight to cash flows that occur after the cutoff date True or false True False

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1. value: 1.44 points The following are the cash flows of two projects: Year Project A Project B 0 $400 $400 1 230 300 2

value: 1.44 points

The following are the cash flows of two projects:

Year	Project A	Project B
0	$400	$400
1	230	300
2	230	300
3	230	300
4	230

a.	If the opportunity cost of capital is 10%, calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project	NPV
A	$
B

Which of these projects is worth pursuing?

	Project A
	Project B
	Both
	Neither

value: 1.44 points

The following are the cash flows of two projects:

Year	Project A	Project B
0	$270	$270
1	150	170
2	150	170
3	150	170
4	150

a.	Calculate the NPV for both projects if the discount rate is 12%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project	NPV
A	$
B

Suppose that you can choose only one of these projects. Which would you choose?

	Project A
	Project B
	Neither

value: 1.44 points

The following are the cash flows of two projects:

Year	Project A	Project B
0	$400	$400
1	230	300
2	230	300
3	230	300
4	230

a.	If the opportunity cost of capital is 10%, calculate the NPV for both projects. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project	NPV
A	$
B

Which of these projects is worth pursuing?

	Project A
	Project B
	Both
	Neither

value: 1.44 points

The following are the cash flows of two projects:

Year	Project A	Project B
0	$230	$230
1	110	130
2	110	130
3	110	130
4	110

What is the payback period of each project? (Round your answers to 2 decimal places.)

Project	Payback Period
A	years
B	years

value: 1.44 points

A new computer system will require an initial outlay of $19,000, but it will increase the firms cash flows by $3,800 a year for each of the next 8 years.

a.	Calculate the NPV and decide if the system is worth installing if the required rate of return is 9%. What if it is 14%? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Rate of Return		NPV	Worth Installing
9%	$		(Click to select) Yes No
14%	$		(Click to select) No Yes

b.	How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Maximum discount rate

Hints

References

eBook & Resources

Hint #1

value: 1.44 points

Here are the cash flows for a project under consideration:

C₀		C₁	C₂
	$	7,660	+	$	5,600	+	$	19,440

a.	Calculate the projects net present value for discount rates of 0, 50%, and 100%. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to the nearest whole dollar.)

Discount rate	Net present value
0%	$
50%	$
100%	$

b.	What is the IRR of the project? (Do not round intermediate calculations. Enter your answer as a whole percent.)

IRR

References

WorksheetLe

value: 1.44 points

Consider projects A and B with the following cash flows:

	C₀		C₁	C₂		C₃
A		$	43	+	$	27	+	$	27	+	$	27
B			68	+		37	+		37	+		37

a-1.	What is the NPV of each project if the discount rate is 10%? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project	NPV
A	$
B	$

a-2.

Which project has the higher NPV?

	Project A
	Project B

b-1.	What is the profitability index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Project	Profitability index
A
B

b-2.

Which project has the higher profitability index?

	Project A
	Project B

c-1.

Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects?

	Project A
	Project B

c-2.

Which project is most attractive to a firm that is limited in the funds it can raise?

	Project A
	Project B
	Both

rev: 03_16_2015_

value: 1.48 points

Here are the expected cash flows for three projects:

	Cash Flows (dollars)
Project	Year:	0		1		2	3		4
A			6,200		+	1,300	+	1,300		+	3,600		0
B			2,200			0	+	2,200		+	2,600	+	3,600
C			6,200		+	1,300	+	1,300		+	3,600	+	5,600

a.	What is the payback period on each of the projects?

Project	Payback period
A	years
B	years
C	years

If you use a cutoff period of 2 years, which projects would you accept?

	Project A
	Project B
	Project C
	Project A and Project B
	Project B and Project C
	Project A and Project C
	Projects A, B, and C
	None

If you use a cutoff period of 3 years, which projects would you accept?

	Project A
	Project B
	Project C
	Project A and Project B
	Project B and Project C
	Project A and Project C
	Projects A, B, and C
	None

d-1.	If the opportunity cost of capital is 10%, calculate the NPV for projects A, B, and C. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)