Question
Could you please help me out? thank you very much. 1. A project which has an initial cost of $9,191 will generate the following net
Could you please help me out? thank you very much.
1.
A project which has an initial cost of $9,191 will generate the following net cash flows at the end of each year:
Year 1: +$4,000
Year 2: +$3,000
Year 3: +$2,000
Year 4: +$2,000
It is known that this project has a positive NPV at the company's cost of capital of 8%. Which of the following is closest to the IRR on this project?
A.8.6%
B.7.8%
C.8.8%
D.7.6%
2.
Consider the following project:
Year 0 cash flow:-100
Year 1 cash flow:40
Year 2 cash flow:50
Year 3 cash flow:60
Year 4 cash flow:-
Discount rate:15%The NPV of the project is closest to:
A.12.6
B.12.0
C.15.0
D.42.9
3.
Tank Ltd is considering undertaking the purchase of a new piece of equipment that is expected to increase pre-tax income(EBITDA) by $7,000 each year for the next 5 years. It costs $30,000 to purchase today and for tax purposes must be depreciated down zero over its 8 year useful life using the straight-line method. If Tank is actually forecasting a salvage (for capital budgeting purposes) of $15,000 after 5 years, what is the machine's net cash flow (after tax) for year 5? Assume the tax rate is 30%.
NB: EBITDA is "Earnings Before Interest, Taxes, Depreciation and Amortisation"
A.$24,400
B.$19,900
C.$18,750
D.$22,000
4.
- A firm is considering aproject that has the following estimated cashflows:Increased sales to business of $160,000 for the next 5 years (starting in one year's time).
- Increased costs of $20,000 forthe next five years (startingin one year's time).
- The initial capital expenditure requiredis $100,000, and salvage value at the end of 5 years is expected to be $30,000.
- Cost of the feasibility study is $10,000.
If the firm is facing a discount rate of 11%, what is the NPV of this project?
Ignore taxes.
A.$567,229
B.$373,229
C.$425,229
D.$435,229
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