66) Northwest Industries is considering a project with the following cash flows:

Question

66) Northwest Industries is considering a project with the following cash flows:
Initial Outlay = $2,800,000
After-tax operating cash flows for years 1-4 = $850,000 per year
Additional after-tax terminal cash fl ow at end of Year 4 = $125,000
Compute the net present value of this project if the company’s discount rate
is 14%.
a. $239,209
b. $725,000
c. -$138,561
d. -$249,335

70) If the NPV (Net Present Value) of a project with multiple sign reversals is
positive, then the project’s required rate of return ________ its calculated IRR
(Internal Rate of Return).
a. must be greater than
b. could be greater or less than
c. must be less than
d. Cannot be determined without actual cash flows.

Explanation / Answer

66) d. -$249,335 70) a. must be greater than

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