FIN 571 Week 5 Connect Problems

FIN 571 Week 5 Connect
Problems
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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 10,50011,500
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 __
Final Exam Answers just a click away FIN 571 Final Exam (Newest)

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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Problems

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 ?

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 $ ____ $ _____ $ _____ $____
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 $ _____ $ _____ $ _____ $ _____
$ _____
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
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FIN 571 Week 5 Connect Problems

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FIN 571 Week 5 Connect Problems