Please consider the following information for the next 4 questions.

Jacob Inc. is considering a capital expansion project. The initial investment of undertaking this project is $188,500. This expansion project will last for five years. The net operating cash flows from the expansion project at the end of year 1, 2, 3, 4 and 5 are estimated to be $28,500, $38,780, $58,960, $77,680 and $95,380 respectively.

Jacob has a weighted average cost of capital of 18%.

Question 5 (3.33 points)

Based on Jacobs weighted average cost of capital, what is the NPV of undertaking this expansion project? That is, what is the NPV if the weighted average cost of capital is used as the discount rate? Shall Jacob undertake the investment project?

Question 5 options:

	NPV=-$27,360.82. Jacob shall not undertake the investment project since NPV<0.
	NPV=-$18,853.43. Jacob shall not undertake the investment project since NPV<0.
	NPV=$10,817.20. Jacob shall undertake the investment project since NPV>0.
	NPV=$1,127.65. Jacob shall undertake the investment project since NPV>0.

Question 6 (3.33 points)

Based on Jacobs weighted average cost of capital, what is the profitability index (PI)of undertaking this project? That is, what is the profitability index if the weighted average cost of capital is used as the discount rate? Shall Jacob undertake the investment project?

Question 6 options:

	PI=1.06. Jacob shall undertake the investment project since PI>1.
	PI=0.90. Jacob shall not undertake the investment project since PI<1.
	PI=1.01. Jacon shall undertake the investment project since PI>1.
	PI= 0.85. Jacob shall not undertake the investment project since PI<1.

Question 7 (3.33 points)

What is the internal rate of return (IRR) if Jacob undertakes this project? Based on the IRR, shall Jacob undertake this investment project assuming the weighted average cost of capital is the appropriate discount rate for the capital budgeting problems considered.

Question 7 options:

	IRR=14.30%. Jacob shall not undertake the investment project since IRR
	IRR=12.05%. Jacob shall not undertake the investment project since IRR
	IRR=19.28%. Jacob shall undertake the investment project since IRR>WACC.
	IRR=18.73%. Jacob shall undertake the investment project since IRR>WACC.

Question 8 (3.33 points)

What is the modified internal rate of return if Jacob undertakes this project. Assuming that the positive cash inflow from undertaking this project will be reinvested at the weighted average cost of capital.

Question 8 options:

	14.76%
	17.41%
	15.54%
	19.05%