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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?
8.Down Under Boomerang, Inc., is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.82 million. The
fixed asset will be depreciated straight-line to zero over its three-year tax