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Two Finance Sample Problems Set




Question;1.I. SAMPLE PROBLEM # 1A "mom and pop store" is going to make a $15,000 investment that will produce the following cash inflows:Year 1.....$11,000Year 2.....$ 9,000Year 3.....$ 5,800a). What is the payback period for this investment?b). Assuming a discount rate/cost of capital of 10%, what is the NPV of this investment and should it be accepted?II. SAMPLE PROBLEM # 2Consider the following project:Year 0 Investment..... -$145,000Year 1 Cash Flow....... 71,000Year 2 Cash Flow....... 68,000Year 3 Cash Flow....... 52,000What is the IRR and if the required rate of return is 14%, should the project be accepted?2. In the overall process of assessing project risk, what is the difference between sensitivity and scenario analysis. How can each be used to measure and prepare for risks associated with capital budgeting efforts? Is one approach better than the other?


Paper#48648 | Written in 18-Jul-2015

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