MGMT640 quiz 6

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%

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 $816,322, $863,275, $937,250, $1,018,610, $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?

Your Answer:

Question 2 options:

Answer

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 $44.00 in Year 1, $72.00 in Year 2, and $129.00 in Year 3. The required rate of return is 20 percent. The net present value is

Your Answer:

Question 4 options:

Answer

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, $817,500, and $1,245,000 over the next three years. What is the payback period for this project?

Your Answer:

Question 7 options:

Answer

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 $ 2,127,590

2 $ 3,787,552

3 $ 3,175,650

4 $ 4,115,899

5 $ 4,556,424