The Cash Flows Used In Capital Budgeting Calculations Are
Question: For the following set of cash flows what is the Internal Rate of Return?
A
B
1
Year
Cash flow
2
0
−$1,000
3
1
$0
4
2
$0
5
3
$1,200
Answer: 6.266%
Question: What is the Internal Rate of Return for the following set of cash flows?
A
B
1
Year
Cash flow
2
1/5/2014
−$1,000
3
6/30/2014
$0
4
3/31/2015
$0
5
6/6/2015
$1,200
Answer: 13.737%
Question: Which of the below is the Net Present Value, Internal Rate of Return, and the Modified Internal Rate of Return for the following cash flows for a project with a cost of capital of 5 percent and a reinvestment rate of 3 percent?
A
B
1
Year
Cash flow
2
0
−$1,000
3
1
−$100
4
2
$0
5
3
$1,300
Answer: $27.75; 5.906%; 5.879%
Question: What is the Net Present Value and the Internal Rate of Return for the following cash flows for a project with a cost of capital of 10 percent?
A
B
1
Date
Cash flow
2
1/1/2014
−$10,000
3
7/1/2014
$500
4
1/1/2015
$500
5
7/1/2015
$500
6
1/1/2016
$500
7
7/1/2016
$500
8
1/1/2017
$10,500
Answer: $59.04; 10.243%
Question: A project has a cost of capital of 5 percent and the following set of cash flows:
A
B
1
Year
Cash flow
2
0
−$1,000
3
1
$0
4
2
$600
5
3
$600
Which of the following is the Net Present Value?
Answer: $60
Question: The Net Present Value Profile for costs of capital from 0 percent to 20 percent of the following set of cash flows crosses from positive to negative between which pair of rates?
A
B
1
Date
Cash flow
2
0
−$20,000
3
1
$0
4
2
$0
5
3
$28,000
Answer: 11%,12%
Question: For an investment with a cost of capital of 9 percent, What is the Profitability Index for the following cash flows:
A
B
1
Date
Cash flow
2
0
−$20,000
3
1
$0
4
2
$0
5
3
$28,000
Answer: 1.081
Question:
Answer: 14%,15%
Question:
Answer: Project A becomes negative at a higher capital cost than Project B.
Question:
Answer: The Net Present value of Project A at 19% is greater than Project B at the same rate.