SHOW ANSWERS

D.05770 14. Which of the following statements is true for a project with $20,000 initial cost, cash inflows of $5,800 per year for 6 years, and a discount rate of 15%? A. Its payback period is roughly 3 1/2 years. B. Its NPV is $2,194. C. Its IRR is 1.85%. D. Its profitability index is 0.109 15. What is the maximum that should be invested in a project at time zero if the inflows are estimated at $50,000 annually for 3 years, and the cost of capital is 9%? A. $126,565.00 B. $101,251.79 C. $130,800.00 D. $109,200.00 16, what percentage change in sales occurs if profits increase by 3% when the firm's degree of operating leverage is 4.5? A. 0.33% B. 0.67% C. 3.33% D. 1.5% 17. How many IRRs are possible for the following set of cash flows? CFo--1,000, C1- +500, C2 300, C +1,000, C +200. A. 4 B. 2 C. 1 D. 3