1. A company is considering a proposal that requires an initial investment of $91,100, has predicted net cash inflows of $30,000 per year for four years and no salvage value. At a discount rate of 10 percent the projects net present value is...
2. Which of the following most accurately describes the term annuity?
a single cash flow that occurs at some future point in time
a series of equal, consecutive cash flows over time
an installment loan with lump sum payments
an investment that grows over time
3. Given the following information and assuming a 10% discount rate, calculate the Net Present Value of the proposal.
Initial Investment ( $50,000)
Operating net cash flows:
Year 1 $23,000
Year 2 $25,000
Year 3 $21,000
Disinvestment (year 3) $500
4. Which of the following capital budgeting tools is most effective in comparing two acceptable projects?
Payback Period
Net Present Value (NPV)
Future Value
Profitability Index (PI)
5. If the present value of net cash inflows of a project is $1,775,424 and the investment in the project is $1,467,293. What is the profitability index?