# finance quiz 6

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To the nearest dollar, what is the net present value of a replacement project whose cash flows are -\$104,000; \$30,000; \$69,000; and \$55,000 for years 0 through 3, respectively? The firm has decided to assume that the appropriate cost of capital is 10%.

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An example of a contingent product is:

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Two projects have the same initial cost.
Project A has estimated cash flows of \$1,000, \$2,000, \$3,000, \$4,000 at the end of years 1 to 4 respectively.
Project B has estimated cash flows of \$4,000, \$3,000, \$2,000, \$1,000 at the end of years 1 to 4 respectively.
Which project will have the greater NPV assuming a positive discount rate?

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Albury Company is adding a new assembly line at a cost of \$8.5 million. The company expects the project to generate cash flows of \$2 million, \$3 million, \$4 million, and \$5 million over the next four years. Its cost of capital is 16 percent. What is the net present value of this project?

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The cost of capital is:

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A company is in the process of constructing a new plant at a cost of \$14 million. It expects the project to generate cash flows of \$10 million, \$7 million, and \$10 million over the next three years. The cost of capital is 14.5 percent p.a. What is the net present value of this project? (in millions to three decimals)

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Indicate whether True or False.

If we know that at rate i p.a. Project A has a greater NPV than Project B then we can conclude with certainty that at rate j p.a., where j is greater than i, Project A will also have a greater NPV.

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The net present value (NPV):

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A company is considering an investment that will cost \$753,000 and have a useful life of 4 years. The cash flows from the project are expected to be \$543,000 per year in the first two years then \$159,000 per year for the last 2 years. If the appropriate discount rate is 15.0 percent per annum, what is the NPV of this investment (to the nearest dollar)?

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Barcode Biz has invested in new machinery at a cost of \$1,450,000. This investment is expected to produce cash flows of \$640,000, \$715,250, \$823,330, and \$907,125 over the next four years. What is the payback period for this project (rounded to two decimal places)?

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