Consider the following two mutually exclusive

111. Consider the following two mutually exclusive projects:
What is the crossover rate for these two projects?
A. 6.29 percent
B. 6.48 percent
C. 6.71 percent
D. 6.75 percent
E. 6.94 percent
9-43

Chapter 09 - Net Present Value and Other Investment Criteria
112. The relevant discount rate for the following set of cash flows is 14 percent. What is the
profitability index?
113. Consider the following two mutually exclusive projects:
The required return is 15 percent for both projects. Which one of the following statements
related to these projects is correct?
9-44

Chapter 09 - Net Present Value and Other Investment Criteria
114. An investment project has an installed cost of $518,297. The cash flows over the 4-year
life of the investment are projected to be $287,636, $203,496, $103,802, and $92,556,
respectively. What is the NPV of this project if the discount rate is zero percent?
115. The Taxi Co. is evaluating a project with the following cash flows:
The company uses a 10 percent interest rate on all of its projects. What is the MIRR using the
discounted approach?
A. 13.25 percent
B. 14.08 percent
C. 16.40 percent
D. 17.17 percent
E. 19.23 percent
9-45

Chapter 09 - Net Present Value and Other Investment Criteria
116. The Chandler Group wants to set up a private cemetery business. According to the CFO,
Barry M. Deep, business is "looking up". As a result, the cemetery project will provide a net
cash inflow of $57,000 for the firm during the first year, and the cash flows are projected to
grow at a rate of 7 percent per year forever. The project requires an initial investment of
$759,000. The firm requires a 14 percent return on such undertakings. The company is
somewhat unsure about the assumption of a 7 percent growth rate in its cash flows. At what
constant rate of growth would the company just break even?
9-46

Chapter 09 - Net Present Value and Other Investment Criteria
Chapter 09 Net Present Value and Other Investment Criteria Answer Key
Multiple Choice Questions