accounting

profileisaevy

 

Multiple Choice Question 56

 

 

Net present value: The Cyclone Golf Resorts is redoing its golf course at a cost of $2,744,320. It expects to generate cash flows of $1, 223,445, $2,007,812, and $3,147,890 over the next three years. If the appropriate discount rate for the firm is 13 percent, what is the NPV of this project?

 

[removed]

$4,836,752

 

 

 

[removed]

$2,092,432

 

 

 

[removed]

$3,112,459

 

 

 

[removed]

$7,581,072

Multiple Choice Question 58

 

   

 

Net present value: Cortez Art Gallery is adding to its existing buildings at a cost of $2 million. The gallery expects to bring in additional cash flows of $520,000, $700,000, and $1,000,000 over the next three years. Given a required rate of return of 10 percent, what is the NPV of this project?

 

[removed]

$197,446

 

 

 

[removed]

$1,802,554

 

 

 

[removed]

-$1,802,554

 

 

 

[removed]

-$197,446

 

ANS:  D

Learning Objective:  LO 2

Level of Difficulty:  Medium

Feedback:  Initial investment = $2,000,000

Length of project = n = 3 years

Required rate of return = k = 10%

Net present value = NPV

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multiple Choice Question 62

 

   

 

Payback: Elmer Sporting Goods is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $812,500, and 1,200,000 over the next three years. What is the payback period for this project?

 

[removed]

3 years

 

 

 

[removed]

More than 3 years

 

 

 

[removed]

2.43 years

 

 

 

[removed]

1.57 years

Multiple Choice Question 71

 

   

 

Internal rate of return: Quick Sale Real Estate Company is planning to invest in a new development. The cost of the project will be $23 million and is expected to generate cash flows of $14,000,000, $11,750,000, and $6,350,000 over the next three years. The company's cost of capital is 20 percent. What is the internal rate of return on this project? (Round to the nearest percent.) 21.57177%

 

[removed]

22%

 

 

 

[removed]

20%

 

 

 

[removed]

28%

 

 

 

[removed]

24%

 

Problem 10.42

 

   

 

An investment of $89 generates after-tax cash flows of $47 in Year 1, $71 in Year 2, and $138 in Year 3. The required rate of return is 20 percent. The net present value is closest to

 

[removed]

$57.41.

 

 

 

[removed]

$79.33.

 

 

 

[removed]

$36.37.

 

 

 

[removed]

$54.37.

 

 

Problem 10.40

 

   

 

Given the following cash flows for a capital project, calculate the NPV and IRR. The required rate of return is 8 percent.

 

 

Year

 

0

1

2

3

4

5

Cash Flows

$-49740

$14540

$15075

$20404

$10577

$5497

 

 

 

[removed]

NPV=4360. IRR=12.84%

 

 

 

[removed]

NPV=3289. IRR=12.84%

 

 

 

[removed]

NPV=3289. IRR=11.66%

 

 

 

[removed]

NPV=4360. IRR=11.66%

 

    • 12 years ago
    • 5
    Answer(1)

    Purchase the answer to view it

    blurred-text
    NOT RATED
    • attachment
      npv_1.xlsx
    Bids(1)