QUESTION 1

1. "Consider a project with the cash flow as depicted in Table 1: The discount rate for this project is 5%. The net present value (NPV) is ________."" Note: Express your answers in strictly numerical terms. For example, if the answer is $500, write enter 500 as an answer."

   Table 1

   Year	Cash Flow
   0	-10,000
   1	5,000
   2	3,000
   3	2,500
   4	2,000

QUESTION 2

1. "Consider the two projects depicted in Table 2: The net present value (NPV) of project A is ________. Note: Express your answers in strictly numerical terms. For example, if the answer is $500, write enter 500 as an answer."

   Table 2

   Project	Year 0	Year 1	Year 2	Year 3	Year 4	Discount
   	Cash Flow	Cash Flow	Cash Flow	Cash Flow	Cash Flow	Rate
   A	-450	60	900	85	0	0.05
   B	-300	100	30	30	30	0.075

QUESTION 3

1. "Consider the two projects depicted in Table 2: The net present value (NPV) of project B is ________. Note: Express your answers in strictly numerical terms. For example, if the answer is $500, write enter 500 as an answer."

QUESTION 4

1. "Consider the cash flow of the two projects depicted in Table 3. If WiseGuy Inc. uses payback period rule to choose projects, which of the projects (Project A or Project B) will rank highest? --- "

   Table 3

   	Project A	Project B
   Time 0	-8,000	-4,000
   Time 1	9,000	3,500
   Time 2	1,000	6,000
   Time 3	1,000	9,000

   		Project A.
   		Project B.
   		Project A and Project B have the same ranking.
   		Cannot calculate a payback period without a discount rate.

QUESTION 5

1. "Consider the cash flow of the two projects depicted in Table 3. If WiseGuy Inc. uses IRR rule to choose projects, which of the projects (Project A or Project B) will rank highest? --- "

   		Project A.
   		Project B.
   		Project A and Project B have the same ranking.
   		Cannot calculate a payback period without a discount rate.

QUESTION 6

1. " Consider the cash flow of the three projects depicted in Table 4. The cost of capital is 15%. The net present value (NPV) of project A is ________. Note: Express your answers in strictly numerical terms. For example, if the answer is $500, write enter 500 as an answer."

   Table 4

   Project	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
   	Cash Flow	Cash Flow	Cash Flow	Cash Flow	Cash Flow	Cash Flow
   A	-10500	11000	5000	5000	5000	5000
   B	-15500	8000	7000	7000	7000	7000
   C	-18000	20000	1000	1000	1000	1000

QUESTION 7

1. "Consider the cash flow of the three projects depicted in Table 4. The cost of capital is 15%. If an investor decided to take projects with a payback period of 1 year or less, which of these projects would he take? --- "

   		Investment A.
   		Investment B.
   		Investment C.
   		none of these investments.

QUESTION 8

1. "Mary is in contract negotiations with a publishing house for her new novel. She has two options. OPTION 1: She may be paid $90000 up front, and receive royalties that are expected to total $2500 at the end of each of the next 6 years. Alternatively, OPTION 2: she can receive $100000 up front and no royalties. Which of the following investment rules would indicate that she should take Option 1, given a discount rate of 5%? Rule I: The Net Present Value rule; Rule II: The Payback Rule with a payback period of 2 years; ---Rule I only. Rule II only. Rule I and II. None. "

   		Rule I only.
   		Rule II only.
   		Rule I and II.
   		None.