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Question1 Supposeyouinvested$10,000fortenyearsatanominalrateof7%peryear.Iftheannualrateofinflationwas3%,whatwastherealvalueofyourinvestmentattheendoftenyears? $19,671 $14,802 $14,637 $13,439 Questiontwo TheNPVofaninvestmentmadetodayis$10,000.Ifpostponedforoneyear,theNPVatthattimewillincreaseby$1,000.Whichofthefollowingiscorrectiftheopportunitycostofcapitalis12%? Postpone; the NPV increases by a positive amount. Postpone; the NPV will be larger. Invest now; the

  1. Question1
  2. Supposeyouinvested$10,000fortenyearsatanominalrateof7%peryear.Iftheannualrateofinflationwas3%,whatwastherealvalueofyourinvestmentattheendoftenyears?
  3. $19,671
  4. $14,802
  5. $14,637
  6. $13,439
  7. Questiontwo
  8. TheNPVofaninvestmentmadetodayis$10,000.Ifpostponedforoneyear,theNPVatthattimewillincreaseby$1,000.Whichofthefollowingiscorrectiftheopportunitycostofcapitalis12%?
  9. Postpone; the NPV increases by a positive amount.
  10. Postpone; the NPV will be larger.
  11. Invest now; the NPV does not grow at a sufficient rate.
  12. Invest now; always accept positive NPV projects.
  13. Question3
  14. ProjectY-Filehasthefollowingcashflows:C0=+1500,C1=-1,000,andC2=-1,000.IftheIRRoftheprojectis21.5%andifthecostofcapitalis15%,youwould:
  15. Accept the project.
  16. Reject the project.
  17. Question4
  18. Considertwomutuallyexclusiveprojectswiththefollowingcashflows:
  19. Projects012
  20. A-400+241+293
  21. B-200+131+172
  22. ChooseaprojectusingtheIRRrule.Theopportunitycostofcapitalis9%.(Youmustshowallworkinalegibleandorderlymanner)

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