Multiple Choice Question 56

Net present value: The Cyclone Golf Resorts is redoing its golf course at a cost of \$2,744,320. It expects to generate cash flows of \$1, 223,445, \$2,007,812, and \$3,147,890 over the next three years. If the appropriate discount rate for the firm is 13 percent, what is the NPV of this project?

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\$7,581,072

Multiple Choice Question 58

Net present value: 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?

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-\$197,446

Multiple Choice Question 62

Payback: Elmer Sporting Goods 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, \$812,500, and 1,200,000 over the next three years. What is the payback period for this project?

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More than 3 years

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1.57 years

Multiple Choice Question 71

Internal rate of return: 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.) 21.57177%

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24%

Problem 10.42

An investment of \$89 generates after-tax cash flows of \$47 in Year 1, \$71 in Year 2, and \$138 in Year 3. The required rate of return is 20 percent. The net present value is closest to

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\$54.37.

Problem 10.40

Given the following cash flows for a capital project, calculate the NPV and IRR. The required rate of return is 8 percent.

Year

0

1

2

3

4

5

Cash Flows

\$-49740

\$14540

\$15075

\$20404

\$10577

\$5497

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NPV=4360. IRR=12.84%

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NPV=3289. IRR=12.84%

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NPV=3289. IRR=11.66%

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NPV=4360. IRR=11.66%