Question
Use the information provided below to answer the following questions about Big Sky Health System, Inc. The director of capital budgeting for Big Sky Health
Use the information provided below to answer the following questions about Big Sky Health System, Inc.
The director of capital budgeting for Big Sky Health System, Inc. has estimated the following cash flows for a new service and has a cost of capital of 10%.
| Year | Expected Net Cash Flow | ||
| 0 | ($100,000) | ||
| 1 | $70,000 | ||
| 2 | $50,000 | ||
| 3 | $20,000 | ||
1a. What is the project’s payback period?
Choice: 4 years
Choice: Not enough information to tell
Choice: 1.6 years
Choice: 2.4 years
1b. What is the project’s NPV?
Choice: $13,981
Choice: $16,458
Choice: $22,385
Choice: $19,985
1c. What is the project’s IRR?
Choice: 14.6%
Choice: 23.6%
Choice: 18.7%
Choice: 8.9%
1d. What is the project’s MIRR?
Choice: 12.0%
Choice: 16.9%
Choice: 13.3%
Choice: 9.5%
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Fundamental Accounting Principles Volume II
Authors: Larson Kermit, Jensen Tilly
14th Canadian Edition
71051570, 0-07-105150-3, 978-0071051576, 978-0-07-10515, 978-1259066511
