4 Your company has a cost of capital equal to 10 If the following projects are mutually exclusive, and you only have the information that is provided, which should you accept A B C E Payback (years) 1 5 2 5 IRR 18 20 20 12 NPV (Millions) $40 $75 $35 $100 a A b B c C d B and C e E 1 points Question 5 A project has an up front cost of $100,000 The project's WACC is 12 percent and its net present value is $10,000 Which of the following statements is most correct a The project should be rejected since its return is less than the WACC b The project's internal rate of return is greater than 12 percent c The project's modified internal rate of return is less than 12 percent d All of the above answers are correct e None of the above answers is correct 1 points Question 6 As the director of capital budgeting for Denver Corporation, you are evaluating two mutually exclusive projects with the following net cash flows Project X Project Z Year Cash Flow Cash Flow 0 $100,000 $100,000 1 50,000 10,000 2 40,000 30,000 3 30,000 40,000 4 10,000 60,000 If Denver's cost of capital is 15 percent, which project would you choose a Neither project b Project X, since it has the higher IRR c Project Z, since it has the higher NPV d Project X, since it has the higher NPV e Project Z, since it has the higher IRR 1 points Question 7 Two projects being considered are mutually exclusive and have the following projected cash flows Project A Project B Year Cash Flow Cash Flow 0 $50,000 $50,000 1 15,625 0 2 15,625 0 3 15,625 0 4 15,625 0 5 15,625 99,500 If the required rate of return on these projects is 10 percent, which would be chosen and why a Project B because it has the higher NPV b Project B because it has the higher IRR c Project A because it has the higher NPV d Project A because it has the higher IRR e Neither, because both have IRRs less than the cost of capital 1 points Question 8 The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10 This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent Assume cash flows occur evenly during the year, 1 365th each day What is the payback period for this investment a 5 23 years b 4 86 years c 4 00 years d 6 12 years e 4 35 years 1 points Question 9 The Seattle Corporation has been presented with an investment opportunity which will yield end of year cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10 This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent What is the NPV for this investment a $135,984 b $ 18,023 c $219,045 d $ 51,138 e $ 92,146 1 points Question 10 Alyeska Salmon Inc , a large salmon canning firm operating out of Valdez, Alaska, has a new automated production line project it is considering The project has a cost of $275,000 and is expected to provide after tax annual cash flows of $73,306 for eight years The firm's management is uncomfortable with the IRR reinvestment assumption and prefers the modified IRR approach You have calculated a cost of capital for the firm of 12 percent What is the project's MIRR a 15 0 b 14 0 c 12 0 d 16 0 e 17 0 1 points Question 11 Polk Products is considering an investment project with the following cash flows Year Cash Flow 0 $100,000 1 40,000 2 90,000 3 30,000 4 60,000 The company has a 10 percent cost of capital What is the project's discounted payback a 1 67 years b 1 86 years c 2 11 years d 2 49 years e 2 67 years 1 points Question 12 The capital budgeting director of Sparrow Corporation is evaluating a project which costs $200,000, is expected to last for 10 years and produce after tax cash flows, including depreciation, of $44,503 per year If the firm's cost of capital is 14 percent and its tax rate is 40 percent, what is the project's IRR a 8 b 14 c 18 d 5 e 12 1 points Question 13 A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below The company's cost of capital is 12 percent, and it can get an unlimited amount of capital at that cost What is the regular IRR (not MIRR) of the better project, i e , the project which the company should choose if it wants to maximize its stock price a 12 00 b 15 53 c 18 62 d 19 08 e 20 46 1 points Question 14 Green Grocers is deciding among two mutually exclusive projects The two projects have the following cash flows Project A Project B Year Cash Flow Cash Flow 0 $50,000 $30,000 1 10,000 6,000 2 15,000 12,000 3 40,000 18,000 4 20,000 12,000 The company's cost of capital is 10 percent (WACC 10 ) What is the net present value (NPV) of the project with the highest internal rate of return (IRR) a $ 7,090 b $ 8,360 c $11,450 d $12,510 e $15,200 1 points Question 15 Braun Industries is considering an investment project which has the following cash flows Year Cash Flow 0 $1,000 1 400 2 300 3 500 4 400 The company's WACC is 10 percent What is the project's payback, internal rate of return, and net present value a Payback 2 4, IRR 10 00 , NPV $600 b Payback 2 4, IRR 21 22 , NPV $260 c Payback 2 6, IRR 21 22 , NPV $300 d Payback 2 6, IRR 21 22 , NPV $260 e Payback 2 6, IRR 24 12 , NPV $300 1 points Question 16 Jackson Jets is considering two mutually exclusive projects The projects have the following cash flows Project A Project B Year Cash Flow Cash Flow 0 $10,000 $8,000 1 1,000 7,000 2 2,000 1,000 3 6,000 1,000 4 6,000 1,000 At what cost of capital do the two projects have the same net present value (That is, what is the crossover rate ) Hint Subtract project Bs cash flows from Project As each year Use the resulting stream of cash flows in your financial calculator to find IRR which is the crossover rate a 11 20 b 12 26 c 12 84 d 13 03 e 14 15

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4 Your company has a cost of capital equal to 10%. If the following projects are mutually exclusive, and you only have the information that

Your company has a cost of capital equal to 10%. If the following projects are mutually exclusive, and you only have the information that is provided, which should you accept?

A B C E

Payback (years) 1 5 2 5

IRR 18% 20% 20% 12%

NPV (Millions) $40 $75 $35 $100

a. A

b. B

c. C

d. B and C

e. E

1 points

Question 5

A project has an up-front cost of $100,000. The project's WACC is 12 percent and its net present value is $10,000. Which of the following statements is most correct?

a.	The project should be rejected since its return is less than the WACC.
b.	The project's internal rate of return is greater than 12 percent.
c.	The project's modified internal rate of return is less than 12 percent.
d.	All of the above answers are correct.
e.	None of the above answers is correct.

1 points

Question 6

As the director of capital budgeting for Denver Corporation, you are evaluating two mutually exclusive projects with the following net cash flows:

	Project X	Project Z
Year	Cash Flow	Cash Flow
0	-$100,000	-$100,000
1	50,000	10,000
2	40,000	30,000
3	30,000	40,000
4	10,000	60,000

If Denver's cost of capital is 15 percent, which project would you choose?

a.	Neither project.
b.	Project X, since it has the higher IRR.
c.	Project Z, since it has the higher NPV.
d.	Project X, since it has the higher NPV.
e.	Project Z, since it has the higher IRR.

1 points

Question 7

Two projects being considered are mutually exclusive and have the following projected cash flows:

	Project A	Project B
Year	Cash Flow	Cash Flow
0	-$50,000	-$50,000
1	15,625	0
2	15,625	0
3	15,625	0
4	15,625	0
5	15,625	99,500

If the required rate of return on these projects is 10 percent, which would be chosen and why?

a.	Project B because it has the higher NPV.
b.	Project B because it has the higher IRR.
c.	Project A because it has the higher NPV.
d.	Project A because it has the higher IRR.
e.	Neither, because both have IRRs less than the cost of capital.

1 points

Question 8

The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. Assume cash flows occur evenly during the year, 1/365th each day. What is the payback period for this investment?

a. 5.23 years

b. 4.86 years

c. 4.00 years

d. 6.12 years

e. 4.35 years

1 points

Question 9

The Seattle Corporation has been presented with an investment opportunity which will yield end-of-year cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. What is the NPV for this investment?

a. $135,984

b. $ 18,023

c. $219,045

d. $ 51,138

e. $ 92,146

1 points

Question 10

Alyeska Salmon Inc., a large salmon canning firm operating out of Valdez, Alaska, has a new automated production line project it is considering. The project has a cost of $275,000 and is expected to provide after-tax annual cash flows of $73,306 for eight years. The firm's management is uncomfortable with the IRR reinvestment assumption and prefers the modified IRR approach. You have calculated a cost of capital for the firm of 12 percent. What is the project's MIRR?

a. 15.0%

b. 14.0%

c. 12.0%

d. 16.0%

e. 17.0%

1 points

Question 11

Polk Products is considering an investment project with the following cash flows:

Year Cash Flow

0 -$100,000

1 40,000

2 90,000

3 30,000

4 60,000

The company has a 10 percent cost of capital. What is the project'sdiscounted payback?

a. 1.67 years

b. 1.86 years

c. 2.11 years

d. 2.49 years

e. 2.67 years

1 points

Question 12

The capital budgeting director of Sparrow Corporation is evaluating a project which costs $200,000, is expected to last for 10 years and produce after-tax cash flows, including depreciation, of $44,503 per year. If the firm's cost of capital is 14 percent and its tax rate is 40 percent, what is the project's IRR?

a. 8%

b. 14%

c. 18%

d. -5%

e. 12%

1 points

Question 13

A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below:The company's cost of capital is 12 percent, and it can get an unlimited amount of capital at that cost. What is theregular IRR(not MIRR) of thebetterproject, i.e., the project which the company should choose if it wants to maximize its stock price?

a. 12.00%

b. 15.53%

c. 18.62%

d. 19.08%

e. 20.46%

1 points

Question 14

Green Grocers is deciding among two mutually exclusive projects. The two projects have the following cash flows:

Project A Project B

Year Cash Flow Cash Flow

0 -$50,000 -$30,000

1 10,000 6,000

2 15,000 12,000

3 40,000 18,000

4 20,000 12,000

The company's cost of capital is 10 percent (WACC = 10%). What is the net present value (NPV) of the project with the highest internal rate of return (IRR)?

a. $ 7,090

b. $ 8,360

c. $11,450

d. $12,510

e. $15,200

1 points

Question 15

Braun Industries is considering an investment project which has the following cash flows:

Year	Cash Flow
0	-$1,000
1	400
2	300
3	500
4	400

The company's WACC is 10 percent. What is the project's payback, internal rate of return, and net present value?

a.	Payback = 2.4, IRR = 10.00%, NPV = $600.
b.	Payback = 2.4, IRR = 21.22%, NPV = $260.
c.	Payback = 2.6, IRR = 21.22%, NPV = $300.
d.	Payback = 2.6, IRR = 21.22%, NPV = $260.
e.	Payback = 2.6, IRR = 24.12%, NPV = $300.

1 points

Question 16

Jackson Jets is considering two mutually exclusive projects. The projects have the following cash flows:

Project A Project B

Year Cash Flow Cash Flow

0 -$10,000 -$8,000

1 1,000 7,000

2 2,000 1,000

3 6,000 1,000

4 6,000 1,000

At what cost of capital do the two projects have the same net present value? (That is, what is the crossover rate?) [Hint: Subtract project Bs cash flows from Project As each year. Use the resulting stream of cash flows in your financial calculator to find IRR which is the crossover rate.]

a. 11.20%

b. 12.26%

c. 12.84%

d. 13.03%

e. 14.15%