Author Question: Determine the five-year equivalent annual annuity of the following project if the appropriate ... (Read 47 times)

captainjonesify

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Determine the five-year equivalent annual annuity of the following project if the appropriate
  discount rate is 16.
 
  Initial Outflow = 150,000
  Cash Flow Year 1 = 40,000
  Cash Flow Year 2 = 90,000
  Cash Flow Year 3 = 60,000
  Cash Flow Year 4 = 0
  Cash Flow Year 5 = 80,000
  A) 7,058 B) 9,872 C) 9,454 D) 8,520

Question 2

Your firm is considering investing in one of two mutually exclusive projects. Project A requires an
  initial outlay of 3,500 with expected future cash flows of 2,000 per year for the next three years.
 
  Project B requires an initial outlay of 2,500 with expected future cash flows of 1,500 per year for
  the next two years. The appropriate discount rate for your firm is 12 and it is not subject to capital
  rationing. Assuming both projects can be replaced with a similar investment at the end of their
  respective lives, compute the NPV of the two chain cycle for Project A and three chain cycle for
  Project B.
  A) 2,865 and 94 B) 3,528 and 136
  C) 5,000 and 1,500 D) 2,232 and 85


DHRUVSHAH

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Answer to Question 1

D

Answer to Question 2

D



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