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Fernando Designs is considering a project that has the following cash flow and WACC data. What is the project’s discounted payback?

WACC:	10.00%
Year	0	1	2	3
Cash flows	-$650	$500	$500	$500

Select one:

a. 1.24 years

b. 1.47 years

c. 1.62 years

d. 1.58 years

e. 1.15 years

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Which of the following values comes closest to the payback of a project that requires an initial investment of $34, produces cash flows of $12 for 5 consecutive years beginning at the end of year 1, and provides a final cash flow at the end of year 6 of $100? The project’s required rate of return is 13%.

Select one:

a. Undefined – there is no payback for this project.

b. 4 years

c. 5 years

d. 6 years

e. 3 years

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Consider a standard project whose NPV is exactly $0. Which of the following is true of the same project’s internal rate of return if the required rate of return is 14%?

Select one:

a. The IRR = 14%

b. The IRR < 0%

c. The IRR > 0%

d. The IRR < 14%

e. The IRR = 0%

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Consider a project with inflows of $20,000 and outflows of $13,000. If the tax rate is 33%, and if the cash flow in Year 1 is $6,500, what is the depreciation amount?

Select one:

a. $5,529

b. $5,485

c. $5,333

d. $5,438

e. $5,387

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Consider a standard capital budgeting project. Which of the following statements would indicate that this project’s NPV is equal to zero?

Select one:

a. The present value of benefits is greater than the present value of costs

b. The total sum of the benefits is equal to the total sum of the costs

c. The profitability index is equal to one

d. The project’s IRR is equal to zero

e. The project has a short payback period

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Jazz World Inc. is considering a project that has the following cash flow and WACC data. What is the project’s NPV? Note that a project’s projected NPV can be negative, in which case it will be rejected.

WACC:	9.75%
Year	0	1	2	3	4
Cash flows	-$1,200	$400	$425	$450	$475

Select one:

a. 0$174.00

b. 0$157.34

c. 0$222.13

d. 0$198.07

e. 0$185.11

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Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

Select one:

a. A project’s NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the WACC.

b. The NPV of a relatively low-risk project should be found using a relatively high WACC.

c. If a project’s NPV is greater than zero, then its IRR must be less than zero.

d. The lower the WACC used to calculate it, the lower the calculated NPV will be.

e. If a project’s NPV is less than zero, then its IRR must be less than the WACC.

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Which of the following values comes closest to the net present value of a project that requires an initial investment of $250 and produces cash flows of $60 per year for 10 consecutive years beginning at the end of year 5 (the cash flows go from the end of year 5 through the end of year 14)? The required rate of return is 13%?

Select one:

a. ($50.32)

b. ($17.23)

c. ($34.55)

d. ($64.70)

e. $1.81

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Susmel Inc. is considering a project that has the following cash flow data. What is the project’s payback?

Year	0	1	2	3
Cash flows	-$475	$150	$200	$300

Select one:

a. 1.96 years

b. 2.85 years

c. 2.47 years

d. 2.42 years

e. 2.88 years

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Which of the following comes closest to the internal rate of return (IRR) of a project that requires an initial investment of $100 and produces a single cash flow of $160 at the end of year 11? The required rate of return for the project is 13%.

Select one:

a. 6.05%

b. 4.37%

c. 3.99%

d. 5.36%

e. 4.81%