FNAN522-020_860-202020
Started on Tuesday, 10 December 2019, 9:41 PM
State Finished
Completed on Tuesday, 10 December 2019, 10:56 PM
Time taken 1 hour 15 mins
Marks 30.00/40.00
Grade 210.00 out of 280.00 (75%)
Question 1 A company is considering a project that has a
Correct discount rate of 5%. It will require an initial
investment of $200,000. In the first year, it will
Mark 1.00 out of
have $100,000 in net cash inflows (one year after
1.00
the initial investment). In year 2, it will have cash
inflows of $100,000 (two years after the initial
investment), and in year 3 the project will generate
$200,000 (three years after the initial investment).
What is the project's NPV? Assume all cash flows
occur at the end of the year.
Select one:
a. $190,476
b. $193,204
c. $358,708
d. $158,709
The correct answer is: $158,709
,Question 2 A project has an initial investment requirement of
Correct $100,000. In year 1, it should earn $25,000; in
year two, $30,000; and in year 3, $50,000. What is
Mark 1.00 out of
the project's internal rate of return? Assume the
1.00
cash flows in years one, two, and three happen at
the end of the year.
Select one:
a. 5.0%
b. 6.21%
c. 7.56%
d. 2.21%
The correct answer is: 2.21%
Question 3 In which of the following situations would it be
Correct appropriate to use the IRR method to make an
investment decision?
Mark 1.00 out of
1.00
Select one:
a. To compare two projects that have an equal
initial investment and lifespan.
b. All of these answers.
c. To assess a project which cash flows
fluctuate between positive and negative.
d. To compare two investments that have
different durations.
The correct answer is: To compare two projects
that have an equal initial investment and lifespan.
, Question 4 Under the internal rate of return rule in capital
Correct budgeting, which of the following statements
CANNOT be true?
Mark 1.00 out of
1.00
Select one:
a. The initial investment can be the cost from
purchasing new equipment.
b. The cash inflows can be estimates.
c. The internal rate of return can vary
throughout the life of a project.
d. The internal rate of return can be equal to
the cost of capital.
The correct answer is: The internal rate of return
can vary throughout the life of a project.
Question 5 You have just been offered a contract
Incorrect worth $5.6 million per year for 3 years.
However, to take the contract, you will
Mark 0.00 out of
need to purchase some new equipment.
1.00
Your discount rate for this project is 15.3%.
You are still negotiating the purchase price
of the equipment. What is the most you can
pay for the equipment and still have a
positive NPV?
Select one:
a. $5.6 million
b. $16.8 million
c. $23.4 million
d. $12.6 million
The correct answer is: $12.6 million
Started on Tuesday, 10 December 2019, 9:41 PM
State Finished
Completed on Tuesday, 10 December 2019, 10:56 PM
Time taken 1 hour 15 mins
Marks 30.00/40.00
Grade 210.00 out of 280.00 (75%)
Question 1 A company is considering a project that has a
Correct discount rate of 5%. It will require an initial
investment of $200,000. In the first year, it will
Mark 1.00 out of
have $100,000 in net cash inflows (one year after
1.00
the initial investment). In year 2, it will have cash
inflows of $100,000 (two years after the initial
investment), and in year 3 the project will generate
$200,000 (three years after the initial investment).
What is the project's NPV? Assume all cash flows
occur at the end of the year.
Select one:
a. $190,476
b. $193,204
c. $358,708
d. $158,709
The correct answer is: $158,709
,Question 2 A project has an initial investment requirement of
Correct $100,000. In year 1, it should earn $25,000; in
year two, $30,000; and in year 3, $50,000. What is
Mark 1.00 out of
the project's internal rate of return? Assume the
1.00
cash flows in years one, two, and three happen at
the end of the year.
Select one:
a. 5.0%
b. 6.21%
c. 7.56%
d. 2.21%
The correct answer is: 2.21%
Question 3 In which of the following situations would it be
Correct appropriate to use the IRR method to make an
investment decision?
Mark 1.00 out of
1.00
Select one:
a. To compare two projects that have an equal
initial investment and lifespan.
b. All of these answers.
c. To assess a project which cash flows
fluctuate between positive and negative.
d. To compare two investments that have
different durations.
The correct answer is: To compare two projects
that have an equal initial investment and lifespan.
, Question 4 Under the internal rate of return rule in capital
Correct budgeting, which of the following statements
CANNOT be true?
Mark 1.00 out of
1.00
Select one:
a. The initial investment can be the cost from
purchasing new equipment.
b. The cash inflows can be estimates.
c. The internal rate of return can vary
throughout the life of a project.
d. The internal rate of return can be equal to
the cost of capital.
The correct answer is: The internal rate of return
can vary throughout the life of a project.
Question 5 You have just been offered a contract
Incorrect worth $5.6 million per year for 3 years.
However, to take the contract, you will
Mark 0.00 out of
need to purchase some new equipment.
1.00
Your discount rate for this project is 15.3%.
You are still negotiating the purchase price
of the equipment. What is the most you can
pay for the equipment and still have a
positive NPV?
Select one:
a. $5.6 million
b. $16.8 million
c. $23.4 million
d. $12.6 million
The correct answer is: $12.6 million
