Question: Highfield Co. is considering a project that will require an initial cash outlay of $78,120 today. The project has a five-year life and will generate

Highfield Co. is considering a project that will require an initial cash outlay of $78,120 today. The project has a five-year life and will generate cash flows of $20,608 every year for next five years. The required rate of return is 15%. What is the payback period?

a.

3.9349
b.

2.8706
c.

3.7908
d.

4.6218

2 points

QUESTION 2

Given the information in Question 1, what is the net present value?

a.

-$9,038.79
b.

$7,812.03
c.

$3,790.80
d.

$9,038.79

2 points

QUESTION 3

Given the information in Question 1, what is the internal rate of return?

a.

8%
b.

12%
c.

10%
d.

6%

2 points

QUESTION 4

Given the information in Question 1, what is the profitability index?

a.

1.8843
b.

-1.8843
c.

0.8843
d.

-0.8843

2 points

QUESTION 5

Given the information in Question 1, what is the maximum price that Highfield has to pay if the target profitability index is 1.2?

a.

$82,098.45
b.

$57,567.68
c.

$78,120
d.

$65,248.13

1 points

QUESTION 6

Given the information in Question 1, what is the minimum annual cash flow that project has to generate in order to accept the project?

a.

$19,376.93
b.

$23,304.41
c.

$22,403.52
d.

$20,608

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