1) Which of the following amounts is closest to the end value (future value) of investing a lump sum of 3,000,000 for 5 years at an effective annual interest rate of 12% compounded annually?

1. 1.702m
2. 1.863m
3. 4.832m
4. 5.287m
5. 5.921m

2. If you could not access sufficient funds to invest in the following projects, which project would be your first choice to invest in?

PROJECT NPV INVESTMENT

A 7,500 10,000

B 8,050 11,500

C 13,200 15,000

D 10,800 18,000

E 14,040 19,500

1. Project A
2. Project B
3. Project C
4. Project D
5. Project E

3) Here are some estimates of the net present value of a project using different interest rates:

Discount rates NPV

6% -100.36

5% -11.57

4% 81.38

3% 178.73

2% 280.76

Which pair of interest rates will provide the most accurate estimate if interpolation is used to estimate the projects internal rate of return?

1. 5% and 6%
2. 4% and 6%
3. 4% and 5%
4. 3% and 5%
5. 2% and 6%

4) In a before-tax analysis of a project, which of the following would not affect NPV?

1. a decrease in the working capital requirements of the project
2. a decrease in the estimated scrap value of an asset used solely in the project
3. a change in the expected life of the project
4. a change in the discount rate for the project
5. a change in the research and development costs already undertaken