QUESTION 1 Highfield Co. is considering a project that will require an initial c

Question

QUESTION 1

Highfield Co. is considering a project that will require an initial cash outlay of $78,120 today. The project has a five-year life and will generate cash flows of $20,608 every year for next five years. The required rate of return is 15%. What is the payback period?

2.8706

4.6218

3.7908

3.9349

QUESTION 2

Given the information in Question 1, what is the net present value?

-$9,038.79

$7,812.03

$3,790.80

$9,038.79

QUESTION 3

Given the information in Question 1, what is the internal rate of return?

10%

8%

12%

6%

QUESTION 4

Given the information in Question 1, what is the profitability index?

-0.8843

1.8843

0.8843

-1.8843

QUESTION 5

Given the information in Question 1, what is the maximum price that Highfield has to pay if the target profitability index is 1.2?

$57,567.68

$65,248.13

$82,098.45

$78,120

QUESTION 6

Given the information in Question 1, what is the minimum annual cash flow that project has to generate in order to accept the project?

$22,403.52

$23,304.41

$19,376.93

$20,608

2.8706

4.6218

3.7908

3.9349

Explanation / Answer

Q1=(c) 3.79 years Q2= (a)-$9021.37 Q3=(a) 10% Q4 = (a) -0.8843 Q5= (c) $82098.45 Q6=(b)$23304.41

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