1) You have the following information on a project's cash flows. The cost of capital is 9.3% Year Cash flows 0 -$ 114 ,000 1 23,000 2 19,000 3 30,000 4 32,000 5 58,000

The NPV of the project is $____. Round to two decimal places.

2)

You have the following information on a project's cash flows.

Year	Cash flows
0	-$108,000
1	33,000
2	33,000
3	37,000
4	65,000
5	55,000

The project's payback is ____ years. Round it to two decimal places.

3) You have the following information on a project's cash flows. The project's required rate is 12%.

Year	Cash flows
0	-$ 85 ,000
1	23,000
2	28,000
3	32 ,000
4	56 ,000

The project's profitablity index is ____ . Round it to two decimal places.

4) A company estimates that its required rate of return is 16 percent. Which of the following projects should the company accept, if all these projects are independent?

Project A requires an initial investment of $2,000,000 and generates a NPV of $58.

Project B has an IRR of 15.5 percent.

Project C requires an initial investment of $1,000,000 and generates an IRR of 16 percent.

None of the above.

5) Which one of the followings is not true about capital budgeting?

It involves identifying projects that will add to the firm's value.

It involves large capital investments.

Capital budgeting decisions can be easily reversed at any time.

It allows the firm's management to analyze potential business opportunities and decide on which ones to undertake.

6)

When NPV and IRR do not agree on choosing mutually-exclusive projects, you should use the IRR rule to make the decision

True

False

7)

The internal rate of return (IRR) is the discount rate at which the NPV of the project equals the initial invesment amount.

	True
	False