Turner Video will invest $88,500 in a project. The firms cost of capital is 10 percent. The investment will provide the following inflows. Use Appendix A for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Year____________Inflow 1 ______________$30,000

2________________32,000

3________________36,000

4_______________ 40,000

5________________44,000

The internal rate of return is 11 percent.

a. If the reinvestment assumption of the net present value method is used, what will be the total value of the inflows after five years? (Assume the inflows come at the end of each year.) (Do not round intermediate calculations and round your answer to 2 decimal places.)

total value of inflows ________

b. If the reinvestment assumption of the internal rate of return method is used, what will be the total value of the inflows after five years? (Use the given internal rate of return. Do not round intermediate calculations and round your answer to 2 decimal places.)

total; value of inflows ________

c. Which investment assumption is better? _Reinvestment assumption of IRR _Reinvestment assumption of NPV

__________________________________________________________________________________________________________________________

Mountain Ski Corp. was set up to take large risks and is willing to take the greatest risk possible. Lakeway Train Co. is more typical of the average corporation and is risk-averse. Projects _______Returns: Expected Value ____________Standard Deviation

A ________ $269,000 _____________________$143,000

B _____________ 734,000 ______________________462,000

C _______________ 153,000 ________________________120,000

D _______________ 163,000 ________________________298,000

a-1. Compute the coefficients of variation. (Round your answers to 3 decimal places.)

Coefficient of Variation

Project A __________________

Project B ________________________

Project C ______________________

Project D ________________________