FIN 5320 FIN5320 Practice Exam 1 with Answers (American Public University)

FIN 5320 FIN/5320 FIN5320 Practice Exam 1

1. All else constant, the net present value of a typical investment project increases when:
2. It will cost $2,500 to acquire an ice cream cart. Cart sales are expected to be $1,600 a year for three years. After the three years, the cart is expected to be worthless as the expected life of the refrigeration unit is only three years. What is the payback period?
3. A project has an initial cost of $8,700 and produces cash inflows of $2,700, $5,100, and $1,600 over the next three years, respectively. What is the discounted payback period if the required rate of return is 7 percent?
4. You are considering two mutually exclusive projects with the following cash flows. Will your choice between the two projects differ if the required rate of return is 8% rather than 11%? If so, what should you do?

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