70.2K

Verified Solution

Link Copied!

What is the profitability index for an investment with the following cash flows given a 14.5 percent required return? Year Cash Flow 0 -$46,500 1 $12,200 2 $38,400 3 $11,300 A. 0.98 B. 1.06 C. 1.02 D. 0.94

2. What is the net present value of a project that has an initial cash outflow of $35,000 and the following cash inflows? The required return is 14.5 percent.

Year Cash Inflows 1 $12,500 2 19,700 3 0 4 10,400 A. -$3,383.25 B. -$3,503.23 C. -$2,481.53 D. -$3,005,.78

3. A project has an initial cost of $30,000 and a 3-year life. The company uses straight-line depreciation to a book value of zero over the life of the project. The projected average net income from the project is $1,766.67 per year for the next 3 years, respectively. What is the accounting rate of return based on average investment?

A. 11.78 percent

B. 14.69 percent

C. 8.72 percent

D. 11.04 percent

4. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent?

Year Project A Project B 0 -$80,000 -$80,000 1 31,000 0 2 31,000 0 3 31,000 110,000 A. accept project B as it always has the higher NPV

B. accept B at 8.5 percent and neither at 13 percent

C. accept project A as it always has the higher NPV

D. accept A at 8.5 percent and B at 13 percent

Answer & Explanation Solved by verified expert

See Answer