Exam 8: Net Present Value and Other Investment Criteria

Majestic Corporation is planning a 12 year project that will have an initial cost of $900,000.During the first 3 years,there will be cash inflows of $80,000.Years 4-10 will see cash inflows of $350,000.Years 11-12 will see cash outflows of $20,000.If the company's required rate of return is 11%,determine the NPV of the project.

A project has a payback period of five years and the firm employs a 10 percent cost of capital.Which of the following statements is correct concerning this Project's discounted payback?

Norbert is considering a project with an initial value of $125,000.Cash inflows during the next 6 years will be $35,000 per year.Given this information,provide the project's payback.

If a project has multiple IRRs,the highest one is assumed to be correct.

When calculating a Project's payback period,cash flows are discounted at:

Determine the project's NPV if the Profitability Index is 1.4; and the investment value is $500,000.

In order for a manager to correctly decide to postpone an investment until one year into the future,the NPV of the investment should:

Which of the following is incorrect for a borrowing project?

When graphing NPV at different discount rates for mutually exclusive projects,the project with the lower IRR should be selected whenever:

If the IRR for a project is 15 percent,then the Project's NPV would be:

A project costing $20,000 generates cash inflows of $9,000 annually for the first three years,followed by cash outflows of $1,000 annually for two years.At most,this project has ______ different IRR(s).

The IRR is the rate of return on the cash flows of the investment,also known as the opportunity cost of capital.

Ajax Corporation is planning a 10 year project that will have an initial cost of $500,000.During the first 2 years,there will be cash outflows of $40,000.Years 3-6 will see cash inflows of $120,000.Years 7-10 will see cash inflows of $200,000.If the company's required rate of return is 9%,determine the NPV of the project.

What is the approximate maximum amount that a firm should consider paying for a project that will return $15,000 annually for 5 years if the opportunity cost is 10 percent?

When hard capital rationing exists,projects may be accurately evaluated by use of:

As the discount rate is increased,the NPV of a specific project will:

If the net present value of a project which costs $20,000 is $5,000 when the discount rate is 10 percent,then the:

The decision rule for net present value is to:

What is the maximum that should be invested in a project at time zero if the inflows are estimated at $40,000 annually for three years,and the cost of capital is 9 percent?

Suppose a project requires an initial investment of $1,000 and it will yield $1,050 one year later.The NPV of the project is: