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?

$4,836,752

$7,581,072

$2,092,432

$3,112,459

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?

-$1,802,554

$1,802,554

-$197,446

$197,446

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?

2.43 years

1.57 years

More than 3 years

3 years

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.)

20%

24%

22%

28%

An investment of $116 generates after-tax cash flows of $50 in Year 1, $97 in Year 2, and $90 in Year 3. The required rate of return is 20 percent. The net present value is closest to

$45.11.

$22.22.

$28.71.

$33.19.

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

Year

0 1 2 3 4 5

Cash Flows $-45341 $13821 $14823 $15802 $9075 $4785

NPV=2261. IRR=11.66%

NPV=2636. IRR=10.51%

NPV=2261. IRR=10.51%

NPV=2636. IRR=11.66%