NPV IRR Payback Practice Quiz - FIN 300 NPV/IRR/Payback...

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FIN 300 – NPV/IRR/Payback Practice Quiz 1.You have a project with the following cash-flow timeline: At t=0 You invest $40M in the project (cash-flow = -$40M) t=1yr Cash flow = $0M t=2yrs Cash flow = $0M t=3yrs Cash flow = +$80M Other investment opportunities – with the same risk – produce a 25% annual return. What is the NPV (net present value)? What is the IRR (internal rate of return)? Should you accept the project? 2.You are choosing from 3 projects – with the given information: Project Investment at t=0 NPV IRR A $10M $1M B $40M $3M C $20M -$2M a)If the projects are mutually exclusive, which project or projects should you choose? 25% 10% 15%

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