Question
For Questions 27 to 29 Suppose you are evaluating a project with the cash inflows shown in the following table. Your boss has asked you
For Questions 27 to 29
Suppose you are evaluating a project with the cash inflows shown in the following table. Your boss has asked you to calculate the projects NPV. You dont know the projects initial cost, but you do know the projects regular payback period is 2.5 years.
Years | Cash Flow |
Year 1 | $300K |
Year 2 | $425K |
Year 3 | $500K |
Year 4 | $400K |
27. If the projects cost of capital is 9%, the projects NPV is which of the following?
A. $376,516
B. $327,405
C. $392,886
D. $261,924
28. Which of the following statements indicate a disadvantage of using the regular payback period (not the discounted payback period) for capital budgeting decisions? Choose all that apply.
A. The payback period does not take the projects entire life into account.
B. The payback period does not take the time value of money into account.
C. The payback period is calculated using net income instead of cash flows.
29. ______ is the single best method to use when making capital budgeting decisions.
A. NPV
B. IRR
C. Payback Period
D. Discounted Payback Period
E. Profitability Index
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