If a project has a net present value of $1.000 when a discount rate of 10 percent is used, what can be concluded about the rate of return of the project? The rate of return is greater than 10 percent O The cate of return is less than 10 percent O The rate of return equals 10 percent. The rate of return is zero percent O None of the above.
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- Explain how the internal rate of return and net present value are related. If a project has an NPV of $50,000 using a 10 percent discount factor, what does this imply about that project's IRR?If a project has a net present value of $1.000 when a discount rate of 10 percent is used, what can be concluded about the rate of return of the project? The rate of return is greater than 10 percent O The cate of return is less than 10 percent O The rate of return equals 10 percent. The rate of return is zero percent O None of the above.Project A has a net present value of zero when the discount factor of 20% is used. How much return is the project earning?
- When comparing two projects with different lives, why do you compute an annuity with an equivalent present value (PV) to the net present value (NPV)? A. so that the projects can be compared on their cost or value created per year B. to reduce the danger that changes in the estimate of the discount rate will lead to choosing the project with a shorter time frame C. so that you can see which project has the greatest net present value (NPV) D. to avoid complications arising from alternating cash inflows and outflows O E. to ensure that cash flows from the project with a longer life that occur after the project with the shorter life has ended are consideredWhich of the following statements is incorrect regarding project appraisal techniques? At IRR, the NPV of a project is equal to 0 If the IRR of a project is 8%, its NPV calculated using a discount rate greater than 8%, will be less than 0 If the NPV of a project is greater than 0, then its PI will exceed 1. If the PI of a project equals 0, then the project's initial cash outflow equals the PV of its cash inflowsFind the external rate of return (ERR) for the following project when the external reinvestment rate is $ = 10% (equal to the MARR). Is this an acceptable project?
- If a project has a profitability index of 1.20, then the project's internal rate of return is O equal to the discount rate. O less than the discount rate. O greater than the discount rate. O equal to 20%. Save for Later O 10 C Attempts: 0 of 1 used F10 Submit AnsConsider this project with an internal rate of return of 15.5%. The following are the Year Cash Flow 0 +$ 105 1 2 -65 -65 a. What is project NPV if the discount rate is 13%? Note: Negative amount should be indicated by a minus sign. Do not round 2 decimal places. NPV b. Should you accept the project? Yes O No < Prd. If the required return is 8 percent, what is the NPV for project B? e. At what discount rate would the company be indifferent between these two projects?
- 2) First, calculate the payback period and NPV for all projects below. For all the projects, the relevant discount rate is 10%. Then, comment on why the payback period provides misleading information about the following: a. Project A b. Project B versus Project C c. Project D versus Project E d. Project D versus Project F Year A B C D E F 0 -1.000 -1.000 -1.000 -1.000 -1.000 -1.000 1 1,000 100 400 500 400 500 2 200 300 500 400 500 3 300 200 500 400 10.000 4 400 100 400 5 500 500 400Suppose a project with a 6% discount rate yields R5000 for the next three years. Annual operating costs amount to R1000 for each year, and the one time initial investment cost is R8000. a. Calculate the Net Present Value (NPV) of this project.b. Calculate the cost-benefit ratio for the project. c. Is the project acceptable? Motivate your answer.Which of the following statements is true if the NPV of a project is - $4,000 (negative $4,000) and the required rate of return is 5 percent?a. The project’s IRR is less than 5 percent.b. The required rate of return is lower than the IRR.c. The NPV assumes cash flows are reinvested at the IRR.d. The NPV would be positive if the IRR was equal to 5 percent.