Use the following data for questions 6-9.

A project generates cash flows of $125k, $125k, and $95k. The required rate of return is 10%.

1. The value of the project or asset is______. Hint: Remember the concept of the value of an asset.

1. $288,317
2. $383,750
3. $345,000
4. $370,000
5. $250,000

2. The highest price that a firm/investor will pay for this project is_____. Hint: The price of the project is the same as the investment cost.

1. $288,317
2. $383,750
3. $345,000
4. $370,000
5. $250,000

3. Given your answers to 6 and 7

1. IRR = 10%
2. PI = 1.0
3. NPV = 0

1. I and II only
2. III only
3. II and III only
4. I, II, and III
5. II only

4. If NPV = 0, the IRR = 10% and will fall on the security market line.

True False

10. Which of the following is consistent with the objective of the firm

a. IRR

b. PI

c. NPV

d. Payback method

e. Assuming that the discount rate is 0%