Question: 1. A project under consideration currently has a negative net present value of $11,600 using a 6% rate of return and an estimated 4-year life.

1. A project under consideration currently has a negative net present value of $11,600 using a 6% rate of return and an estimated 4-year life. What must be the minimum present value of the soft benefits of this project in order to make it acceptable?

Correct Answer : $3,348

2. An investment of $100,000 promises net operating cash inflows of $40,000 per year for each of the next three years. If the required rate of return is 14% , what is the net present value of the project?

Correct Answer : ($7,135)

3. An investment promises a return of $8,000 per year at the end of each of the next 6 years. How much will you be willing to invest today to receive the $8,000 payments and earn a return of 7%?

Correct Answer : $38,132

4. An investment that costs $50,000 will return $15,000 operating cash flows per year for five years. Determine the net present value of the investment if the required rate of return is 14%. Should the investment be undertaken?

Correct Answer : Yes, the net present value is positive at $1,496.50

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