Chapter 11 Quiz At FIN 360 Quiz Chapter 11 Capital Budgeting 1. Junebug, Inc. is evaluating a potential project, Project A, that costs $70 in the beginning and produces $500 in revenue at the end of the first year. Junebug's WACC is 10%. What is the NPV of this project? 2. Junebug, Inc. is evaluating a different potential project, Project B, that costs $110 in the beginning and produces $400 at the end of each of the next two years. What is the NPV of this project? 3. Two independent projects each have an NPV greater than zero. Will a company accept both projects if the company can afford both projects? 4. Two mutually exclusive projects each have an NPV greater than zero. Will a company accept both projects if the company can afford both projects? 5. If a project has a negative NPV, will a company accept that project? (Be 6. The initial cost of a potential project is $700. Revenues are estimated to be $300 each year for the next five years. The company's cost of capital is 10.5%. Using your financial calculator, what is the NPV for Project J? very careful about minus signs that you may see on your calculator, but the number that answers the question may be positive. NPV can be positive or negative. Just be sure to answer the question that is asked.) Questions 7-11: What are the financial calculator inputs or output for the $300 revenues calculated for Question 6 above? (Ignore the $700 for questions 7-11.) 7. N= 8. I/Y 9. PV= 10. PMT= 11. FV= 12. The company's cost of capital is 10.5%. If the IRR of a proposed project is 11.25%, will the company accept this project? 13. The company's cost of capital is 10.5%. If the IRR of a proposed project is 9.25%, will the company accept this project? 14. True of False: Calculating a project's IRR results in NPV=0. 15. True or False: The payback method ignores cash flows received after the breakeven point