Week 9.

Suyeon Rim 1760605

1. The answer is B.

If the project has a zero net present value, the project earns a return exactly equal to the discount
rate. Because there .would be no discount rate, no initial investment cost. Therefore, there would
be variable, the discount rate reflecting the projects risk. The after-taxC cash flow at time t would

be changed according to the rate of r, so that would not change the result.

2. The answer is A.

Expected return rate is not mentioned in this text. Since the cost of capital is not mentioned, we
cannot comparable. Therefore, you cannot determine which project should be accepted given the

information.

3. The answer is C.

NPV= -$42,398 + $13,407/(1+0.12)+ $21,219/ (1+0.12)^2 + $17,800/ (1+0.12)^3 = -$ 842.12

4. The answer is B.

0 = -$114,600 + $35,900/ (1+IRR) + $50,800/(1+IRR)^2 + $45,000/(1+IRR)^3 -> therefore 7.03

percent.

5. The answer is B.

Payback = 3+ ($7,800-$1,100-$1,640-$3,800)/ $4,500 =3.28