Question 1
Calculate 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 2
A project has the following cash flow. What is the project’s NPV?
Discount rate:
11.00%
Year
0
1
2
3
4
Cash flows
−$1,000
$350
$350
$350
$350
Question 3
IRR 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 IRR
when NPV would have led you to reject the project.
o IRR assumes that intermediate cashflows from a project are invested at IRR
o There may be several IRRs if the cashflows are unconventional
o You may get a negative IRR
Question 4
A project has the following cashflow. Calculate NPV.
WACC:
o 9.00%
o
o
o
Year
o 0
o 1
o 2
o 3
Cash flows
o −$1,000
o $500
o $500
o $500
Question 5
Calculate the project’s IRR.
Do not write the ‘%’ sign in your answer. If the answer is 12.45%, you will enter 12.45
Year
0
1
2
3
4
Cash flows
−$1,050
$400
$400
$400
$400
Question 6
A project has following cashflow. Calculate NPV
WACC:
10.25%
Year
0
1
2
3
4
5
Cash flows
−$1,000
$300
$300
$300
$300
$300
Question 7
Given the following cashflows calculate NPV.
WACC:
10.00%
Year
0
1
2
3
Cash flows
−$1,050
$450
$460
$470
Question 8
Given the following cashflows calculate payback period.
WACC:
10.00%
Year
0
1
2
3
Cash flows
−$1,050
$450
$460
$470
Question 9
Calculate 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 10
Find the payback period for a project that requires investment of $48 and returns $14 every years for 7 years.