FIN 571 Week 5 Connect Problems - Assignments

FIN 571 Week 5 Connect
Problems

1. The difference between the present value of an investment?s future cash
flows and its initial cost is the:
 net present value.
 internal rate of return.
 payback period.
 profitability index.
 discounted payback period.

2. Which statement concerning the net present value (NPV) of an investment or
a financing project is correct?
 A financing project should be accepted if, and only if, the NPV is exactly
equal to zero.
 An investment project should be accepted only if the NPV is equal to the
initial cash flow.
 Any type of project should be accepted if the NPV is positive and rejected if
it is negative.
 Any type of project with greater total cash inflows than total cash outflows,
should always be accepted.
 An investment project that has positive cash flows for every time period
after the initial investment should be accepted.

Find the Week 1 Connect Problems answers here FIN 571 Week 1 Connect
Problems

3. The primary reason that company projects with positive net present values
are considered acceptable is that:
 they create value for the owners of the firm.
 the project's rate of return exceeds the rate of inflation.
 they return the initial cash outlay within three years or less.
 the required cash inflows exceed the actual cash inflows.
 the investment's cost exceeds the present value of the cash inflows.

4. Accepting a positive net present value (NPV) project:
 indicates the project will pay back within the required period of time.
 means the present value of the expected cash flows is equal to the project’s
cost.
 ignores the inherent risks within the project.
 guarantees all cash flow assumptions will be realized.
 is expected to increase the stockholders’ value by the amount of the NPV.

Week 2 Connect problems Answers just a click away FIN 571 Week 2 Connect
Problems

5. The net present value method of capital budgeting analysis does all of the
following except:
 incorporate risk into the analysis.
 consider all relevant cash flow information.
 use all of a project's cash flows.
 discount all future cash flows.
 provide a specific anticipated rate of return.

6. What is the net present value of a project with an initial cost of $36,900 and
cash inflows of $13,400, $21,600, and $10,000 for Years 1 to 3, respectively?
The discount rate is 13 percent.
 −$287.22
 −$1,195.12
 −$1,350.49
 $204.36
 $797.22

Complete Answers here FIN 571 Week 3 Connect Problems

7. Maxwell Software, Inc., has the following mutually exclusive projects.

Year Project A Project B

0 –$17,000 –$20,000

1 10,500 11,500

2 7,000 8,000

3 2,600 7,000

a-1.Calculate the payback period for each project. (Do not round

intermediate calculations and round your answers to 3 decimal places,

e.g., 32.161.)

Payback period

Project A ____years

Project B ____years

a-2. Which, if either, of these projects should be chosen?

Project __

b-1. What is the NPV for each project if the appropriate discount rate is 15

percent? (A negative answer should be indicated by a minus sign. Do not

round intermediate calculations and round your answers to 2 decimal

places, e.g., 32.16.)

NPV

Project A $____

Project B $____

b-2. Which, if either, of these projects should be chosen if the appropriate

discount rate is 15 percent?

Project __

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8. Flatte Restaurant is considering the purchase of a $9,900 soufflé maker. The
soufflé maker has an economic life of six years and will be fully depreciated
by the straight-line method. The machine will produce 1,950 soufflés per
year, with each costing $2.35 to make and priced at $5.20. Assume that the
discount rate is 14 percent and the tax rate is 40 percent.
What is the NPV of the project? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.)
NPV $_____
Should the company make the purchase?
Yes/No

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9. The Best Manufacturing Company is considering a new investment. Financial

projections for the investment are tabulated here. The corporate tax rate is

38 percent. Assume all sales revenue is received in cash, all operating costs

and income taxes are paid in cash, and all cash flows occur at the end of the

year. All net working capital is recovered at the end of the project.

Year 0 Year 1 Year 2 Year 3

Year 4

Investment $ 29,000

Sales revenue $ 15,000 $15,500 $16,000

$13,000

Operating costs 3,200 3,300 3,400

2,600

Depreciation 7,250 7,250 7,250

7,250

Net working capital spending 350 400 450 350 ?

a. Compute the incremental net income of the investment for each year. (Do

not round intermediatecalculations.)

Year 1 Year 2 Year 3 Year 4

Net income $ ____ $ _____ $ _____ $____

b. Compute the incremental cash flows of the investment for each year. (Do

not round intermediatecalculations. A negative answer should be

indicated by a minus sign.)

Year 0 Year 1 Year 2 Year 3

Year 4

Cash flow $ _____ $ _____ $ _____ $

_____ $ _____

c. Suppose the appropriate discount rate is 12 percent. What is the NPV of

the project? (Do not roundintermediate calculations and round your

answer to 2 decimal places, e.g., 32.16.)

NPV $_____

About Author

This article covers the topic for the University Of Phoenix FIN 571 Week 5
Connect Problems. The author is working in the field of education from last 5
years. This article covers the basic of Fin 571 from UOP. Other topics in the class
are as follows:

FIN 571 Final Exam (Newest)
FIN 571 Week 1 Quiz
FIN 571 Week 2 Quiz
FIN 571 Week 3 Quiz
FIN 571 Week 4 Quiz
FIN 571 Week 5 Quiz
FIN 571 Week 6 Quiz
FIN 571 Week 1 Connect Problems
FIN 571 Week 2 Connect Problems
FIN 571 Week 3 Connect Problems
FIN 571 Week 4 Connect Problems
FIN 571 Week 5 Connect Problems

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