PLEASE ANSWER ALL QUESTIONS AND EXPLAIN IN DETAIL

1) A project costs $50,000 to set up, and returns $20,000 in year 1, $20,000 in year 2, and $40,000 every year after that. What is the payback period of the project?

2) A project costs $173 million to set up, and returns $66 million dollars in each of the first three years of operation. What is the net present value of the project with a discount rate of 8%?Please write your answers in dollars. Write $15m as "$15000000.00". If the answer is negative, blackboard can only read it if you type as "$-15000000.00". Please do not enter your answers as "-$15000000.00".

3) A project costs $152 million to set up, and returns $73 million in year 1, $29 million in year 2, and $35 million in year 3. What is the net present value of the project with a discount rate of 5%? Please write your answers in dollars. Write $15m as "$15000000.00". If the answer is negative, blackboard can only read it if you type as "$-15000000.00". Please do not enter your answers as "-$15000000.00".

4) A project has a large up front cost and positive cashflows in future years. To evaluate this project using IRR:

a) We will only one IRR, so we can compare to the appropriate discount rate, and accept the project if the IRR is less than the discount rate.

b)we will only get one IRR, so we can compare to the appropriate discount rate, and accept the project if the IRR is more than the discount rate.

c) We may get multiple IRR making it difficult to use the IRR to decide if we should proceed with the project.

d) insufficient information

5) A project has a large up front cost and positive cashflows in future years. To evaluate this project using NPV:

a) We calculate the NPV and we would want to do the project if the NPV is greater than $0.

b) We calculate the NPV and we would want to do the project if the NPV is less than $0.

c) The NPV function is curved and behaves inconsistently for this type of project, making it difficult to use.

d) Insufficient information

6) A project has a NPV of $20,000. Generally this means that:

a) We should proceed with the project

b) We should not proceed with the project

c) We should be indifferent to proceeding with the project

d) Insufficient Information

7) A project IRR is 8%. If the appropriate discount rate for the project is 7%, what should we do with the project?

a) We should proceed with the project

b) We should not proceed with the project

c) We should be indifferent to proceeding with the project

d) Insufficient Information

8) If a project is of below average risk we should:

a) Increase the discount rate used to calculate the NPV

b) Decrease the discount rate used to calculate the NPV

c) Not change the discount rate used to calculate the NPV

9)

Which of the following project evaluation methods does not analyze all cashflows when determining metrics to decide whether to do the project? Select all answers that apply

a) NPV

b) IRR

c) Payback Period

d) All of the Above

10) True or False: The NPV and IRR are calculated using the same formula, so on normal projects they should produce the same decision when considering whether to proceed with the project.

a) True

b) False