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  • Exam 3 - Unit 7 Self Assessment With Answers - Chapter 10 Capital Budgeting

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    Cep Enrico
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    The document contains information about capital budgeting projects being considered by various companies. It provides cash flow data and asks questions to calculate key metrics. For the Van Auken Inc. project, the payback is 2.6 years, the internal rate of return is 21.22%, and the net present value is $260.43. For other projects, the questions ask to calculate the net present value based on the cash flow data and specified weighted average cost of capital. The net present values provided range from $60.52 to $142.37. Additional questions ask to calculate the internal rate of return for other projects based on their cash flow data over multiple years. The internal rates of return provided

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    The document contains information about capital budgeting projects being considered by various companies. It provides cash flow data and asks questions to calculate key metrics. For the Van Auken Inc. project, the payback is 2.6 years, the internal rate of return is 21.22%, and the net present value is $260.43. For other projects, the questions ask to calculate the net present value based on the cash flow data and specified weighted average cost of capital. The net present values provided range from $60.52 to $142.37. Additional questions ask to calculate the internal rate of return for other projects based on their cash flow data over multiple years. The internal rates of return provided

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    1K views1 page

    Exam 3 - Unit 7 Self Assessment With Answers - Chapter 10 Capital Budgeting

    Uploaded by

    Cep Enrico
    The document contains information about capital budgeting projects being considered by various companies. It provides cash flow data and asks questions to calculate key metrics. For the Van Auken Inc. project, the payback is 2.6 years, the internal rate of return is 21.22%, and the net present value is $260.43. For other projects, the questions ask to calculate the net present value based on the cash flow data and specified weighted average cost of capital. The net present values provided range from $60.52 to $142.37. Additional questions ask to calculate the internal rate of return for other projects based on their cash flow data over multiple years. The internal rates of return provided

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 1

    Question1

    Question2
    A

    Unit7SelfAssessmentChapter10:TheBasicsofCapitalBudgeting
    VanAukenInc.isconsideringaprojectthathasthefollowingcashflows:
    Projected
    Payback
    2.6
    Year
    CashFlow
    0
    1,000
    IRR
    21.22%
    1
    400
    NPV
    $ 260.43
    2
    300
    3
    500
    4
    400
    Whataretheprojectspayback,internalrateofreturn,andnetpresentvalue?
    WACC:
    10.00%

    Question4
    D

    Year:
    Year0
    Year1
    Year2
    Year3
    CashFlow:
    $(1,000.00) $ 450.00 $ 460.00 $ 470.00
    WACC:
    10.00%
    NPV
    $142.37
    AdlerEnterprisesisconsideringaprojectthathasthefollowingcashflowandWACCdata.Whatistheproject'sNPV?
    Notethataproject'sprojectedNPVcanbenegative,inwhichcaseitwillberejected.
    Year:
    Year0
    Year1
    Year2
    Year3
    CashFlow:
    $(950.00) $ 500.00 $ 400.00 $ 300.00
    WACC:
    10.00%
    NPV
    $60.52
    BabcockInc.isconsideringaprojectthathasthefollowingcashflowandWACCdata.Whatistheproject'sNPV?Note
    thataproject'sprojectedNPVcanbenegative,inwhichcaseitwillberejected.
    Year:
    Year0
    Year1
    Year2
    Year3
    CashFlow:
    $(1,000.00) $ 450.00 $ 470.00 $ 490.00

    Question5
    C

    IRR
    19.05%
    ChoiComputerSystemsisconsideringaprojectthathasthefollowingcashflowdata.Whatistheproject'sIRR?Notethat
    aproject'sprojectedIRRcanbelessthantheWACC(andevennegative),inwhichcaseitwillberejected.
    Year:
    Year0
    Year1
    Year2
    Year3
    Year4
    Year5
    CashFlow:
    $(1,000.00) $ 300.00 $ 295.00 $ 290.00 $ 285.00 $270.00

    Question3
    C

    IRR
    13.78%
    ThompsonStoresisconsideringaprojectthathasthefollowingcashflowdata.Whatistheproject'sIRR?Notethata
    project'sprojectedIRRcanbelessthantheWACC(andevennegative),inwhichcaseitwillberejected.
    Notes:
    IRRisthediscountratethatforcesPVinflows=cost
    Netpresentvalue(NPV)isdefinedasthepresentvalueofaproject'scashinflowsminusthepresentvalueofitscosts.Ittellsushowmuch
    theprojectcontributestoshareholderwealth.
    ThelargertheNPV,themorevaluetheprojectaddsandthusthehigherthestock'sprice.
    NPVisgenerallyreggardedasthebestsinglescreeningcriterion.

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