1.A project has an initial cost of $27,400 and a market value of $32,600. What is the difference between these two values called?

payback value

internal return

net present value

profitability index

discounted payback

2.The length of time a firm must wait to recoup the money it has invested in a project is called the:

3.The internal rate of return is defined as the:

maximum rate of return a firm expects to earn on a project.

rate of return a project will generate if the project in financed solely with internal funds.

discount rate that equates the net cash inflows of a project to zero.

discount rate which causes the net present value of a project to equal zero.

No answer text provided.

4.If a firm accepts Project A it will not be feasible to also accept Project B because both projects would require the simultaneous and exclusive use of the same piece of machinery. These projects are considered to be:

interdependent

mutually exclusive.

economically scaled.

operationally distinct.

independent

5.A project has a net present value of zero. Which one of the following best describes this project?

The project's cash inflows equal its cash outflows in current dollar terms.

The summation of all of the project's cash flows is zero.

The project has no cash flows.

The project requires no initial cash investment.

The project has a zero percent rate of return.

6.Which one of the following methods determines the amount of the change a proposed project will have on the value of a firm?

profitability index

internal rate of return

net present value

discounted payback

7.

Samuelson Electronics is analyzing two independent projects. Project A has a net present value of $6,800. Project B has a net present value of $28,400. Which project(s) should be accepted?

Project A only

Project B only

Both A and B

Neither A nor B

Answer cannot be determined based on the information given.

8.

Kramer is analyzing two mutually exclusive projects. Project A has a net present value of $6,800. Project B has a net present value of $28,400. Which project(s) should be accepted?

Project A only

Project B only

Both A and B

Neither A nor B

Answer cannot be determined based on the information given.

9.

The Peterman Reality Bus Tour are considering the following project with the following cash flows. What is the NPV of the Project if the required rate of return is 12%

Year	Cash Flow
0	-80,000
1	31,000
2	31,000
3	31,000

10.Should Peterman accept the project in the previous problem?

Yes

No

11.Kramer is considering a ketchup & mustard in the same bottle project with the following cash flows. What is the IRR of the Project.

Year	Cash Flow
0	-7,000
1	3,000
2	1,000
3	4,000

Enter your answer as x.xx% without the % symbol.

12.

Using the information from the previous problem. If Kramer has a required rate of 5% should he invest in the ketchup & mustard in the same bottle project?

Yes

No

13. Renovations to the Cloud Club are expected to cost $2 Million. If the renovations result in annual after-tax cash flows of $630,000 what is the Payback Period (in years) for the Project?

14.

Kramer is considering a cologne that smells like the beach with the following cash flows. What is the Payback of the Project. Enter your answer as x.xx

Year

Cash Flow

0

-8,000

1

3,000

2

3,000

3- 6,000

15.

Kramer is considering a Restaraunt called P,B&J's that only serves peanut butter and jelly sandwiches. He estimates the following cash flows. What is the Modified Internal Rate of return (MIRR) on this project if the cost of capital is 10%. Enter your answer as x.xx

Year

Cash Flow

0

-4,500

1

2,000

2- 9,000

16.

Rickshaws in NYC is considering human powered conveyances for the streets of New York City. They estimate the following cash flows. What is the MIRR of the project if the cost of capital is 8% . Enter your answer as x.xx

Year

Cash Flow

0

-10,000

1- 10 3,000/yr for 10 years

17.

Using the Rickshaws answer above, should the project be funded?

Yes

No

18.Kramer expects the pizza restaurant where customers make their own pie will require and CF in time 0 of -67,000. Annual Cash flows are expected to be $11000 a year forever. If the required rate of return (aka cost of capital) is 10% what is the NPV of the project?

19.

Kramer wants to determine the IRR on a project that will make the Alex Theatre, "that stinky old movie house" according to Jerry, a new performing arts center. The cash flows are below. What is the IRR?

Year

Cash Flow

0

-1500

1

300

2

300

3

300

4

600

5

600

6

600

7

400

8

400

9

400

10 400

20.A roll out tie dispenser is being analyzed. The project has cash flows of $45 each year for 5 years and an initial cash outlay of $200 today. If the required rate of return on this project is 8% was is the NPV?

Part 2

1.

G & L Plastic Molders spent $1,200 last week repairing a machine. This week the company is trying to decide if the machine could be better utilized if they assigned it a proposed project. When analyzing the proposed project, the $1,200 should be treated as which type of cost?

opportunity

fixed

incremental

sunk

erosion

2.

Which one of the following best illustrates sales erosion as it relates to a hot dog stand located on the beach?

providing both ketchup and mustard for its customer's use

repairing the roof of the hot dog stand because of water damage

selling fewer hot dogs because hamburgers were added to the menu

offering French fries but not onion rings

losing sales due to bad weather

3.

Which of the following should be included in the analysis of a new product?

I. money already spent for research and development of the new product II. reduction in sales for a current product once the new product is introduced III. increase in accounts receivable needed to finance sales of the new product