AMERICAN UNIVERSITY OF IRAQ SULAIMANI

Department of Business Administration

Principle of Finance $-$ FIN$301-$ Fall $2023$

Final Exam $-{10}^{th}$ November $2023$

Time: $2\mathrm{.}45pm-4\mathrm{.}45pm$

Question one:

Briarcliff Stove Company is considering a new product line to supplement its range line. It is anticipated that the new product line will involve cash investment of $$700,000$ at time $0$ and $$1\mathrm{.}0$ million in year $1.$ After$-$tax cash inflows of $$250,000$ are expected in year $2,$$$300,000$ in year $3,$$$350,000$ in year $4,$ and $$400,000$ each year thereafter through year $10.$ Though the product line might be viable after year $10,$ the company prefers to be conservative and end all calculations at that time.

a$.$ If the required rate of return is $15$ percent, what is the net present value of the project? Is it acceptable?