# FIN 5080 Chapter 10 Quiz Problems

December 16, 2020

Question 1

Calculate the payback period for a project that requires investment of \$5,400 and will provide the cashflows of \$1,200,  \$400, \$700, \$3,000 and \$500 in years 1 thru 5 respectively.

Question 2

A project has the following cash flow. What is the project’s NPV?

 Discount rate: 11.00% Year 0 1 2 3 4 Cash flows −\$1,000 \$350 \$350 \$350 \$350

Question 3

IRR has the following drawbacks. Check all that apply. No credit if you miss or wrongly check any option.

o   IRR may lead you to a wrong decision if you are deciding between mutually exclusive projects.

o   For a project with conventional cashflows you may decide to take a project based on IRR

when NPV would have led you to reject the project.

o   IRR assumes that intermediate cashflows from a project are invested at IRR

o   There may be several IRRs if the cashflows are unconventional

o   You may get a negative IRR

Question 4

A project has the following cashflow. Calculate NPV.

 WACC: o   9.00% o o o Year o   0 o   1 o   2 o   3 Cash flows o   −\$1,000 o   \$500 o   \$500 o   \$500

Question 5

Calculate the project’s IRR.

 Year 0 1 2 3 4 Cash flows −\$1,050 \$400 \$400 \$400 \$400

Question 6

A project has following cashflow. Calculate NPV

 WACC: 10.25% Year 0 1 2 3 4 5 Cash flows −\$1,000 \$300 \$300 \$300 \$300 \$300

Question 7

Given the following cashflows calculate NPV.

 WACC: 10.00% Year 0 1 2 3 Cash flows −\$1,050 \$450 \$460 \$470

Question 8

Given the following cashflows calculate payback period.

 WACC: 10.00% Year 0 1 2 3 Cash flows −\$1,050 \$450 \$460 \$470

Question 9

Calculate the NPV of a project that requires investment of 937 and provides the cashflows of 104, 232, 294, 272 in the next 4 years. The relevant discount rate is 12%. (All numbers are in dollars)

Question 10

Find the payback period for a project that requires investment of \$48 and returns \$14 every years for 7 years.