9
Use the following information to answer questions 1 through 3.
You are analyzing a proposed project and have compiled the following information:
Year
Cash flow
0
$145,000
1
$ 33,400
2
$ 70,500
3
$ 82,100
Required payback period
3 years
Required return
9.50 percent
________ 1.
What is the net present value of the proposed project?
a. $6,239.12
b. $6,831.84
c. $8,221.29
d. $8,376.91
_
________ 2.
Should the project be accepted based on the internal rate of return (IRR)? Why or why not?
a. no; The project IRR is greater than the required return.
b. no; The project IRR is greater than zero.
c. yes; The project IRR is greater than the required return.
d. yes; The project IRR is equal to zero.
________ 3.
Should the proposed project be accepted based on the payback period? Why or why not?
a. yes; The payback period is greater than the required payback period.
b. yes; The payback period is less than the required payback period.
c. no; The payback period is greater than the required payback period.
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 Spring '08
 Ddavidson
 Finance, Net Present Value, Internal rate of return, $6,239.12, $8,221.29, $8,376.91, $33,400 2

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