FIN 571 TUTOR Imagine Your Future /fin571tutor.com FIN 571 TUTOR Imagine Your Future /fin571tutor.co | Page 79

ignores the inherent risks within the project.
guarantees all cash flow assumptions will be realized.
means the present value of the expected cash flows is equal to the
project’s cost.
5.The net present value method of capital budgeting analysis does all of
the following except:
use all of a project's cash flows.
discount all future cash flows.
consider all relevant cash flow information.
incorporate risk into the analysis.
provide a specific anticipated rate of return.
6.What is the net present value of a project with an initial cost of $36,900
and cash inflows of $13,400, $21,600, and $10,000 for Years 1 to 3,
respectively? The discount rate is 13 percent.
7.Maxwell Software, Inc., has the following mutually exclusive projects.
a-1.
Calculate the payback period for each project. (Do not round
intermediate calculations and round your answers to 3 decimal places, e.g.,
32.161.)
Payback period
Project A
1.938 years
Project B
2.063 years
________________________________________
a-2.
Which, if either, of these projects should be chosen?
b-1.
What is the NPV for each project if the appropriate discount rate is
15 percent? (A negative answer should be indicated by a minus sign. Do
not round intermediate calculations and round your answers to 2 decimal
places, e.g., 32.16.)
b-2.
Which, if either, of these projects should be chosen if the
appropriate discount rate is 15 percent?