A firm has an opportunity to invest $$95,000$ today that will yield $$109,250$ in one year. If

interest rates are $4\%,$ what is the net present value $($NPV$)$ of this investment?

A$)$ $$10,048$

B$)$ $$11,053$

C$)$ $$16,077$

D$)$ $$14,250$

$2.$ A farmer sows a certain crop. It costs $$240,000$ to buy the seed, prepare the ground, and sow

the crop. In one year's time it will cost $$93,200$ to harvest the crop. If the crop will be worth

$$350,000,$ and the interest rate is $7\%,$ what is the net present value $($NPV$)$ of this investment?

A$)$ $$240,000$

B$)$ $$87,103$

C$)$ $$0$

D$)$ $$567,103$

$3.$ An auto$-$parts company is deciding whether to sponsor a racing team for a cost of $$1$ million.

The sponsorship would last for three years and is expected to increase cash flows by $$570,000$

per year. If the discount rate is $6\mathrm{.}9\%,$ what will be the change in the value of the company if it

chooses to go ahead with the sponsorship?

A$)$ $$498,597$

B$)$ $$747,896$

C$)$ $$797,756$

D$)$ $$847,615$

$4.$ An orcharder spends $$110,000$ to plant pomegranate bushes. It will take four years for the

bushes to provide a usable crop. He estimates that every year for $20$ years after that he will

receive a crop worth $$10,500$ per year. If the discount rate is $9\%,$ what is the net present value

$($NPV$)$ of this investment?

A$)-$$$42,098$

B$)-$$$21,049$

C$)$ $$8420$

D$)$ $$12,629$

$5.$ The owners of a chain of fast$-$food restaurants spend $$25$ million installing donut makers in all

their restaurants. This is expected to increase cash flows by $$11$ million per year for the next five

years. If the discount rate is $5\mathrm{.}3\%,$ were the owners correct in making the decision to install

donut makers?

A$)$ No$,$ as it has a net present value $($NPV$)$ of $-$$$4\mathrm{.}45$ million.

B$)$ No$,$ as it has a net present value $($NPV$)$ of $-$$$2\mathrm{.}22$ million.

C$)$ Yes, as it has a net present value $($NPV$)$ of $$13\mathrm{.}34$ million.

D$)$ Yes, as it has a net present value $($NPV$)$ of $$22\mathrm{.}23$ million.