16) A project has the following cash flows. What is the internal rate of return?

Year/Cash Flow

0/ -$89,300.00

1/ $82,900.00

2/ $4,200.00

3/ $5,800.00

A) 1.02 percent B) 6.77 percent C) 5.97 percent D) 1.11 percent E) 3.45 percent

17) A company wants to purchase a new machine costing $1.46 million. Management is estimating the machine will generate cash inflows of $223,000 the first year and $600,000 for the following four years. If management requires a minimum 12 percent rate of return, should the firm purchase this particular machine based on its IRR? Why or why not?

A) Yes, because the IRR is 20.55 percent B) Yes, because the IRR is 20.12 percent C) No, because the IRR is 20.19 percent D) No, because the IRR is 29.01 percent E) The answer cannot be determined as there are multiple IRRs

18) Yellow Cup is currently considering a project that will produce cash inflows of $11,000 a year for three years followed by $6,500 in Year 4. The cost of the project is $18,000. What is the profitability index if the discount rate is 9 percent?

A) 1.8 B) 1.7 C) 1.6 D) 1.9 E) 2.0

19) A project has expected cash inflows, starting with Year 1, of $900, $1,200, $1,500, and finally in Year 4, $2,000. The profitability index is 1.5 and the discount rate is 12 percent. What is the initial cost of the project?

A) $2,732.60 B) $2,198.45 C) $1,951.47 D) $2,266.44 E) $1,789.87 Please scroll to the next page