# accounting

 Multiple Choice Question 56

Net present value: The Cyclone Golf Resorts is redoing its golf course at a cost of \$2,744,320. It expects to generate cash flows of \$1, 223,445, \$2,007,812, and \$3,147,890 over the next three years. If the appropriate discount rate for the firm is 13 percent, what is the NPV of this project?

 [removed] \$4,836,752
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 \$2,092,432

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 \$3,112,459

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 \$7,581,072 Multiple Choice Question 58

Net present value: Cortez Art Gallery is adding to its existing buildings at a cost of \$2 million. The gallery expects to bring in additional cash flows of \$520,000, \$700,000, and \$1,000,000 over the next three years. Given a required rate of return of 10 percent, what is the NPV of this project?

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 \$197,446

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 \$1,802,554

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 -\$1,802,554

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Level of Difficulty:  Medium

Feedback:  Initial investment = \$2,000,000

Length of project = n =

years

Required rate of return = k = 10%

Net present value = NPV

 -\$197,446   ANS:  D Learning Objective:  LO 2 3 Multiple Choice Question 62

Payback: Elmer Sporting Goods is getting ready to produce a new line of gold clubs by investing \$1.85 million. The investment will result in additional cash flows of \$525,000, \$812,500, and 1,200,000 over the next three years. What is the payback period for this project?

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3 years

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 More than 3 years

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 2.43 years

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 1.57 years Multiple Choice Question 71

Internal rate of return: Quick Sale Real Estate Company is planning to invest in a new development. The cost of the project will be \$23 million and is expected to generate cash flows of \$14,000,000, \$11,750,000, and \$6,350,000 over the next three years. The company’s cost of capital is 20 percent. What is the internal rate of return on this project? (Round to the nearest percent.)
21.57177%

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 22%

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 20%

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 28%

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 24% Problem 10.42

An investment of \$89 generates after-tax cash flows of \$47 in

Year

1, \$71 in Year 2, and \$138 in Year 3. The required rate of return is 20 percent. The net present value is closest to

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 \$57.41.

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 \$79.33.

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 \$36.37.

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 \$54.37. Problem 10.40

Given the following cash flows for a capital project, calculate the NPV and IRR. The required rate of return is 8 percent.

Year

2 3

0 1 4 5

Cash Flows

\$-49740

\$14540

\$15075

\$20404

\$10577

\$5497

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 NPV=4360. IRR=12.84%

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 NPV=3289. IRR=12.84%

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 NPV=3289. IRR=11.66%

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 NPV=4360. IRR=11.66%

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