6. You have determined the profitability of a planned project by finding the present value of all the cash flows from that project. Which of the following would cause the project to look more appealing in terms of the present value of those cash flows?

A. The discount rate decreases.

B. The cash flows are extended over a longer period of time, but the total amount of the cash flows remains the same.

C. The discount rate increases.

D. Answers A and B above.

7. Last year Wei Guan Inc. had $350 million of sales, and it had $270 million of fixed assets that were used at 65% of capacity. In millions, by how much could Wei Guans sales increase before it is required to increase its fixed assets?

$170.09

$179.04

$188.46

$197.88

8) Suppose an investor is interested in purchasing the following income producing property at a current market price of $450,000. The prospective buyer has estimated the expected cash flows over the next four years to be as follows: Year 1 = $40,000, Year 2 = $45,000, Year 3 = $50,000, Year 4 = $55,000. Assuming that the required rate of return is 12% and the estimated proceeds from selling the property at the end of year four is $500,000, what is the NPV of the project? A. $8,829.96 B. $9,889.56 C. $428,113.65 D. $459,889.56

9. As a firms sales grow, its current assets also tend to increase. For instance, as sales increase, the firms inventories generally increase, and purchases of inventories result in more accounts payable. Thus, spontaneously generated funds arise from transactions brought on by sales increases.

10) The discount rate is different for each investor, depending on his expectations about risk and uncertainty.

True/False