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?
 
 
 
 
 
 
 

 
[removed]

 
$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?
 
 
 
 
 
 
 

 
[removed]

 
-$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?
 
 
 

 
[removed]

 
More than 3 years

 
 
 
 

 
[removed]

 
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%
 
 
 
 
 
 
 

 
[removed]

 
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
 
 
 
 
 
 
 

 
[removed]

 
$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

 
 
 

 
[removed]

 
NPV=4360. IRR=12.84%

 
 

 
[removed]

 
NPV=3289. IRR=12.84%

 
 

 
[removed]

 
NPV=3289. IRR=11.66%

 
 

 
[removed]

 
NPV=4360. IRR=11.66%

 
 
 

 

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