FIN 571 Week 5 Connect Problems
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<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 <strong>Connect</strong><br />
<strong>Problems</strong><br />
1. The difference between the present value of an investment?s future cash<br />
flows and its initial cost is the:<br />
net present value.<br />
internal rate of return.<br />
payback period.<br />
profitability index.<br />
discounted payback period.
2. Which statement concerning the net present value (NPV) of an investment or<br />
a financing project is correct?<br />
A financing project should be accepted if, and only if, the NPV is exactly<br />
equal to zero.<br />
An investment project should be accepted only if the NPV is equal to the<br />
initial cash flow.<br />
Any type of project should be accepted if the NPV is positive and rejected if<br />
it is negative.<br />
Any type of project with greater total cash inflows than total cash outflows,<br />
should always be accepted.<br />
An investment project that has positive cash flows for every time period<br />
after the initial investment should be accepted.<br />
Find the <strong>Week</strong> 1 <strong>Connect</strong> <strong>Problems</strong> answers here <strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 1 <strong>Connect</strong><br />
<strong>Problems</strong><br />
3. The primary reason that company projects with positive net present values<br />
are considered acceptable is that:<br />
they create value for the owners of the firm.<br />
the project's rate of return exceeds the rate of inflation.<br />
they return the initial cash outlay within three years or less.<br />
the required cash inflows exceed the actual cash inflows.<br />
the investment's cost exceeds the present value of the cash inflows.<br />
4. Accepting a positive net present value (NPV) project:<br />
indicates the project will pay back within the required period of time.<br />
means the present value of the expected cash flows is equal to the project’s<br />
cost.<br />
ignores the inherent risks within the project.<br />
guarantees all cash flow assumptions will be realized.<br />
is expected to increase the stockholders’ value by the amount of the NPV.
<strong>Week</strong> 2 <strong>Connect</strong> problems Answers just a click away <strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 2 <strong>Connect</strong><br />
<strong>Problems</strong><br />
5. The net present value method of capital budgeting analysis does all of the<br />
following except:<br />
incorporate risk into the analysis.<br />
consider all relevant cash flow information.<br />
use all of a project's cash flows.<br />
discount all future cash flows.<br />
provide a specific anticipated rate of return.<br />
6. What is the net present value of a project with an initial cost of $36,900 and<br />
cash inflows of $13,400, $21,600, and $10,000 for Years 1 to 3, respectively?<br />
The discount rate is 13 percent.<br />
−$287.22<br />
−$1,195.12<br />
−$1,350.49<br />
$204.36<br />
$797.22<br />
Complete Answers here <strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 3 <strong>Connect</strong> <strong>Problems</strong><br />
7. Maxwell Software, Inc., has the following mutually exclusive projects.<br />
Year Project A Project B<br />
0 –$17,000 –$20,000<br />
1 10,500 11,500<br />
2 7,000 8,000<br />
3 2,600 7,000<br />
a-1.Calculate the payback period for each project. (Do not round<br />
intermediate calculations and round your answers to 3 decimal places,<br />
e.g., 32.161.)
Payback period<br />
Project A ____years<br />
Project B ____years<br />
a-2. Which, if either, of these projects should be chosen?<br />
Project __<br />
b-1. What is the NPV for each project if the appropriate discount rate is 15<br />
percent? (A negative answer should be indicated by a minus sign. Do not<br />
round intermediate calculations and round your answers to 2 decimal<br />
places, e.g., 32.16.)<br />
NPV<br />
Project A $____<br />
Project B $____<br />
b-2. Which, if either, of these projects should be chosen if the appropriate<br />
discount rate is 15 percent?<br />
Project __<br />
Final Exam Answers just a click away <strong>FIN</strong> <strong>571</strong> Final Exam (Newest)<br />
8. Flatte Restaurant is considering the purchase of a $9,900 soufflé maker. The<br />
soufflé maker has an economic life of six years and will be fully depreciated<br />
by the straight-line method. The machine will produce 1,950 soufflés per<br />
year, with each costing $2.35 to make and priced at $5.20. Assume that the<br />
discount rate is 14 percent and the tax rate is 40 percent.<br />
What is the NPV of the project? (Do not round intermediate calculations<br />
and round your answer to 2 decimal places, e.g., 32.16.)<br />
NPV<br />
$_____<br />
Should the company make the purchase?<br />
Yes/No<br />
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9. The Best Manufacturing Company is considering a new investment. Financial<br />
projections for the investment are tabulated here. The corporate tax rate is<br />
38 percent. Assume all sales revenue is received in cash, all operating costs<br />
and income taxes are paid in cash, and all cash flows occur at the end of the<br />
year. All net working capital is recovered at the end of the project.<br />
Year 0 Year 1 Year 2 Year 3<br />
Year 4<br />
Investment $ 29,000<br />
Sales revenue $ 15,000 $15,500 $16,000<br />
$13,000<br />
Operating costs 3,200 3,300 3,400<br />
2,600<br />
Depreciation 7,250 7,250 7,250<br />
7,250<br />
Net working capital spending 350 400 450 350 ?<br />
a. Compute the incremental net income of the investment for each year. (Do<br />
not round intermediatecalculations.)<br />
Year 1 Year 2 Year 3 Year 4<br />
Net income $ ____ $ _____ $ _____ $____<br />
b. Compute the incremental cash flows of the investment for each year. (Do<br />
not round intermediatecalculations. A negative answer should be<br />
indicated by a minus sign.)<br />
Year 0 Year 1 Year 2 Year 3<br />
Year 4<br />
Cash flow $ _____ $ _____ $ _____ $<br />
_____ $ _____<br />
c. Suppose the appropriate discount rate is 12 percent. What is the NPV of<br />
the project? (Do not roundintermediate calculations and round your<br />
answer to 2 decimal places, e.g., 32.16.)<br />
NPV<br />
$_____
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<strong>Connect</strong> <strong>Problems</strong>. The author is working in the field of education from last 5<br />
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<strong>FIN</strong> <strong>571</strong> Final Exam (Newest)<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 1 Quiz<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 2 Quiz<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 3 Quiz<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 4 Quiz<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 Quiz<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 6 Quiz<br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 1 <strong>Connect</strong> <strong>Problems</strong><br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 2 <strong>Connect</strong> <strong>Problems</strong><br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 3 <strong>Connect</strong> <strong>Problems</strong><br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 4 <strong>Connect</strong> <strong>Problems</strong><br />
<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 <strong>Connect</strong> <strong>Problems</strong><br />
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