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FIN 5080 Chapter 10 Quiz Problems Solution




Question;Question 1Calculate the payback period for a project that requires investment of $5,400 and will provide the cashflows of $1,200, $400, $700, $3,000 and $500 in years 1 thru 5 respectively.Question 2A project has the following cash flow. What is the project's NPV?Discount rate:11.00%Year01234Cash flows?$1,000$350$350$350$350Question 3IRR has the following drawbacks. Check all that apply. No credit if you miss or wrongly check any option.o IRR may lead you to a wrong decision if you are deciding between mutually exclusive projects.o For a project with conventional cashflows you may decide to take a project based on IRRwhen NPV would have led you to reject the project.o IRR assumes that intermediate cashflows from a project are invested at IRRo There may be several IRRs if the cashflows are unconventionalo You may get a negative IRRQuestion 4A project has the following cashflow. Calculate NPV.WACC:o 9.00%oooYearo 0o 1o 2o 3Cash flowso?$1,000o $500o $500o $500Question 5Calculate the project's IRR.Do not write the '%' sign in your answer. If the answer is 12.45%, you will enter 12.45Year01234Cash flows?$1,050$400$400$400$400Question 6A project has following cashflow. Calculate NPVWACC:10.25%Year012345Cash flows?$1,000$300$300$300$300$300Question 7Given the following cashflows calculate NPV.WACC:10.00%Year0123Cash flows?$1,050$450$460$470Question 8Given the following cashflows calculate payback period.WACC:10.00%Year0123Cash flows?$1,050$450$460$470Question 9Calculate the NPV of a project that requires investment of 937 and provides the cashflows of 104, 232, 294, 272 in the next 4 years. The relevant discount rate is 12%. (All numbers are in dollars)Question 10Find the payback period for a project that requires investment of $48 and returns $14 every years for 7 years.


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