Capital Budgeting4

# Capital Budgeting4 - perc ent. Determine the project's net...

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Old Exam Questions - Capital Budgeting Page 23 of 55 Pages percent. Determine the project's net present value. A. \$315,574.29 B. \$275,574.29 C. \$235,574.29 D. \$295,574.29 E. \$255,574.29 31. You are looking at a project that has the cash flows indicated below. If the appropriate WACC for this project is 12 percent, then what are the NPV and IRR for this project? Year Project A 0 -\$1,000.00 1 \$300.00 2 \$500.00 3 \$400.00 4 \$300.00 A. NPV = \$135.95 and IRR = 18.94% B. NPV = \$137.63 and IRR = 18.81% C. NPV = \$139.24 and IRR = 18.73% D. NPV = \$141.82 and IRR = 18.59% E. NPV = \$143.29 and IRR = 18.48% 32. The cash flows associated with a project can be represented by the following decision tree (conditional probabilities are in parentheses): Year 0 Year 1 Year 2 Year 3 \$200 (.5) \$200 (.5) \$400 (.5) \$200 (.5) \$400 (.5) \$400 (.5) \$600 (.5) -\$800 \$500 (.5) \$600 (.5) \$700 (.5) \$600 (.5) \$800 (.5) \$800 (.5)

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Old Exam Questions - Capital Budgeting Page 24 of 55 Pages \$1,000 (.5) What is the expected NPV for this project if the appropriate cost of capital is 10 percent? A. \$387.83 B. \$396.28 C. \$408.87 D. \$417.24 E. \$425.50 33. You are given the cash flows indicated below for Projects A and B. If the appropriate cost of capital for both projects is 8 percent, then what is the Modified Internal Rate of Return (MIRR) for the project with the highest net present value (NPV)? Year Project A Project B 0 -\$1,000.00 -\$1,000.00 1 \$ 500.00 \$0.00 2 \$ 500.00 \$0.00 3 \$ 500.00 \$1,600.00 A. 17.22% B. 17.52% C. 17.82% D. 18.12% E. 18.42% 34. Project A has the cash flows indicated below. If we assume infinite replication and if the appropriate cost of capital is 14 percent, then what is the net present value (NPV) of this infinitely replicated project using the equivalent annual annuity approach? Year
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## This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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Capital Budgeting4 - perc ent. Determine the project's net...

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