Question details

Quick Sale Real Estate Company is planning to invest in a new development. The cost
$ 16.00

Question 1 (1 point)

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.)

Question 1 options:

20%

24%

22%

28%

Initial investment = $23,000,000
Length of project = n = 3 years
Required rate of return = k = 20%
To determine the IRR, the trial-and-error approach can be used. Set NPV = 0.
Try IRR = 21.6%.

 

Question 2 (1 point)

Muncy, Inc., is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $820,322, $863,275, $937,250, $1,019,610, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment?

 

 

Question 3 (1 point)

Given the following cash flows for a capital project, calculate the IRR using a financial calculator

 

Year

 

0

1

2

3

4

5

Cash Flows

($50,467)

$12,746

$14,426

$21,548

$8,580

$4,959

Question 3 options:

 

8.41%

8.05%

8.79%

7.9%

 

Question 4 (1 point)

An investment of $83 generates after-tax cash flows of $38.00 in Year 1, $68.00 in Year 2, and $133.00 in Year 3. The required rate of return is 20 percent. The net present value is

 

 

Question 5 (1 point)

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?

Question 5 options:

            -$197,446

   

$1,802,554

$197,446

-$1,802,554

 

 

Question 6 (1 point)

Which ONE of the following statements about the payback method is true?

Question 6 options:

The payback method is consistent with the goal of shareholder wealth maximization

The payback method represents the number of years it takes a project to recover its initial investment plus a required rate of return.

 

There is no economic rational that links the payback method to shareholder wealth maximization.

None of these statements are true.

 

Question 7 (1 point)

McKenna Sports Authority 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, $822,500, and $1,200,000 over the next three years. What is the payback period for this project?

 

Question 8 (1 point)

Monroe, Inc., is evaluating a project. The company uses a 13.8 percent discount rate for this project. Cost and cash flows are shown in the table. What is the NPV of the project?

Year Project

0 ($11,368,000)

1 $ 2,112,590

2 $ 3,787,552

3 $ 3,325,650

4 $ 4,115,899

5 $ 4,556,424

Your Answer:

Question 8 options:

 

 

 

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