Q7 - 8,000.00 $ 3,202.97 25.71% $ - FIN 301 Winter...

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FIN 301 Winter 2011-02-17 Quiz Seven – Version A (150 points possible) NAME _________________________________________________________________ Calculator Model _________________________________________________________ Consider the following series of cash flows: Date Cash Flow 1/1/2000 $(14,500.00 ) 12/31/2000 $ 5,000.00 12/31/2001 $ 6,000.00 12/31/2002 $ 7,000.00 12/31/2003 $ 8,000.00 1. What is the Internal Rate of Return (IRR)? Enter the cash flows into your financial calculator and solve for IRR. IRR = 25.71% 2. What is the 2-second audit test to verify that the IRR you calculated is correct? Provide a detailed description of the test or perform it. Check that the NPV at 25.71% is approximately $0.00. Date Cash Flow PV 1/1/2000 $(14,500.00 ) $(14,500.00 ) 12/31/2000 $ 5,000.00 $ 3,977.28 12/31/2001 $ 6,000.00 $ 3,796.49 12/31/2002 $ 7,000.00 $ 3,523.26 12/31/2003 $
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Unformatted text preview: 8,000.00 $ 3,202.97 25.71% $ - FIN 301 Winter 2011-02-17 Quiz Seven Version B (100 points possible) NAME _________________________________________________________________ Calculator Model _________________________________________________________ Consider the following series of cash flows: Date Cash Flow 1/1/2000 $(14,500.00 ) 12/31/2000 $ 5,000.00 12/31/2001 $ 6,000.00 12/31/2002 $ 7,000.00 12/31/2003 $ 8,000.00 1. What is the Net Present Value (NPV) of the series of cash flows at 10%? Date Cash Flow PV 1/1/2000 $(14,500.00 ) $(14,500.00 ) 12/31/2000 $ 5,000.00 $ 4,545.45 12/31/2001 $ 6,000.00 $ 4,958.68 12/31/2002 $ 7,000.00 $ 5,259.20 12/31/2003 $ 8,000.00 $ 5,464.11 10.00% $ 5,727.44 2. Would you accept the project associated with these cash flows? WHY or WHY NOT? Yes. NPV is greater than or equal to $0.00....
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Q7 - 8,000.00 $ 3,202.97 25.71% $ - FIN 301 Winter...

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