Question

1. You are analyzing a project with the following cash flows:

Year 0:      -240,000

Year 1:      + 10,000

Year 2:      + 55,000

Year 3:      +100,000

Year 4:      +380,000

What is the NPV for this project, using a 15% discount rate?

Multiple Choice

• The Project has an NPV of $69,281

• The Project has an NPV of $58,445

• The Project has an NPV of $70,617

• The Project has an NPV of $93,301

What is the IRR for this project?

Multiple Choice

• The Project has an IRR of 26.51%

• The Project has an IRR of 28.13%

• The Project has an IRR of 22.93%

• The Project has an IRR of 19.32%

What is the Payback for this project:

Multiple Choice

• The Project has a payback of 3.20 years

• The Project has a payback of 3.88 years

• The Project has a payback of 3.05 years

• The Project has a payback of 3.28 years

What is the Profitability Index for this Project

Multiple Choice

• The Project has a P.I. of 1.65

• The Project has a P.I. of 2.33

• The Project has a P.I. of 1.39

• The Project has a P.I. of 1.44

Based on your analysis and given what you know about capital budgeting, which one of the following statements is correct regarding the Project just analyzed in the previous 5 questions (#14-#18)?

Multiple Choice

• You should accept the Project since its IRR is lower than the hurdle rate of 15%

• You should reject the Project

• You should accept the Project, since its Profitability Index is less than 1.0

• You should accept the Project, since its NPV is positive

Answer 1