4. (TCO 3 and 4) What is the net present value of a project with the following c

Question

4. (TCO 3 and 4) What is the net present value of a project with the following cash flows, if the discount rate is 15 percent? Year 0 1 2 3 4 Cash flow -$45,000 $11,520 $13,630 $16,470 $18,990 (Points : 4) -$2,989.48 -$2,599.55 $1,153.37 $2,880.08 $3,312.09 5. (TCO 4) Leward Manufacturing is spending $115,000 to update its equipment. This is necessary if the firm wishes to be competitive in the marketplace and provide a wide array of product models. The company estimates that these updates will improve its cash inflows by $27,500 a year, for eight years. What is the payback period? (Points : 4) 4.18 years 5.82 years 6.62 years 7.79 years This project never pays back 6. (TCO 4) The postponement of a project until conditions are more favorable: (Points : 4) is a valuable option. is referred to as the option to extend. could not cause a negative net present value project to become a positive net present value project. will generally cause the internal rate of return for a project to decline. 7. (TCO 4) ___________, occurs when a firm cannot raise financing for a project under any circumstances. (Points : 4) contingency planning. hard rationing. soft rationing. capital constraint. scenario analysis. 8. (TCO 4) ABC Cameras is considering an investment that will have a cost of $10,000 and the following cash flows: $6,000 in year 1, $4,000 in year 2 and $3,000 in year 3. Assume the cost of capital is 10%. Which of the following is true regarding this investment? (Points : 4) The net present value of the project is approximately $10,000 This project should be accepted because it has a positive net present value This project

Explanation / Answer

4. NPV = -$2,989.48 5. payback period= 115000/27500 = 4.18 years 6. is referred to as the option to extend. 7. capital constraints, occurs when a firm cannot raise financing for a project under any circumstances. 8. NPv = 1014.27 This project should be accepted because it has a positive net present value 9. second year depreciation amount under MACRS= $60000 * 32% = $19,200 10. after-tax cash flows for the company = $(100000 - 40000) * (1-30%) + 40000 = $82,000

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.