Quiz.Chapter.9.Solutions.April 2006 - Accounting 202 Quiz 9...

Quiz.Chapter.9.Solutions.April 2006
Download Document
Showing pages : 1 of 2
This preview has blurred sections. Sign up to view the full version! View Full Document
Accounting 202 Quiz 9 Spring 2006 Chapter 9 April 13, 2006 ANSWERS Last Name:______________________ First Name: ____________________ 1. A project will require an initial investment of $750,000 and will return $200,000 each year for five years. If taxes are ignored and the required rate of return is 9%, what is the project’s net present value? Based on this analysis, should the company proceed with the project? Answer ($200,000 * 3.8897) - $750,000 = $27,940 Yes, since the net present value is greater than zero, the company should proceed with the project. 2. A project will require an initial investment of $600,000 and is expected to generate the following cash flows: Year 1 $100,000 Year 2 $250,000 Year 3 $250,000 Year 4 $200,000 Year 5 $100,000 a) What is the project’s payback period? Answer $100,000 + $250,000 + $250,000 = $600,000, so the payback period is three years. b) If the required rate of return is 20% and taxes are ignored, what is the project’s net present value? Answer:
Background image of page 1
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Create a FREE account now to get started. Log In

The email address you entered is not valid. The email address you provided is already in use.
Your username must be at least 5 characters. Your username must consist of only alphanumeric characters. Your username must contain at least one letter. Your username contains inappropriate language. Another user has already claimed this username.
Your password must be at least 6 characters in length.
{[ $select.selected.label ]} Please select a valid school.
By creating an account you agree to our Privacy Policy, Terms of Use, and Honor Code.
Create my FREE account Processing...
Sign Up with Facebook

We will never post anything without your permission.

Already on Course Hero? Log In