Page 295 - BA2 Integrated Workbook STUDENT 2018
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Supplementary objective test questions
CHAPTER 14 – LONG-TERM DECISION MAKING
14.1 A project requires an investment of $500,000. It is expected that it will generate
cash inflows of $150,000 per year for the next 5 years.
The payback period for the project is _____ years and _____ months. (to
the nearest month)
14.2 Two NPVs have been calculated for a project using the following discount rates:
10% = $(173,500)
5% = $15,150
Estimate the IRR for the project. ___________%
14.3 A landlord receives a rent of $1,000 to be received over ten successive years.
The first payment is due now.
If interest rates are 8%, then the present value of this income stream is
equal to?
A $6,951
B $7,247
C $7,345
D $8,138
14.4 A project costing $350,000 has the following expected cash flows:
Year Cash flow ($000)
1 100
2 150
3 120
4 100
Calculate the Net Present Value (NPV) for the project if the relevant rate of
interest is 8.5%. $___________
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