Non-Random 1

Please consider the following information for the next 4 questions.

Cencora Inc. is considering a capital expansion project. The initial investment of undertaking this project is $576,254. This expansion project will last for five years. The net operating cash flows from the expansion project at the end of year 1, 2, 3, 4 and 5 are estimated to be $67,641, $40,000, $245,595, $524,838 and $469,778 respectively.

Cencora has a weighted average cost of capital of 28%.

Question 16 (

Based on Cencora's weighted average cost of capital, what is the NPV of undertaking this expansion project? That is, what is the NPV if the weighted average cost of capital is used as the discount rate? Shall Cencora undertake the investment project?

Question 16 options:

	NPV=$154,319.64. Cencora shall undertake the investment project since NPV>0.
	NPV=-$38,785.74. Cencora shall not undertake the investment project since NPV<0.
	NPV=-$49,645.74. Cencora shall not undertake the investment project since NPV<0.
	NPV=$771,598.20. Cencora shall undertake the investment project since NPV>0.

Question 17

Based on Cencora's weighted average cost of capital, what is the profitability index (PI)of undertaking this project? That is, what is the profitability index if the weighted average cost of capital is used as the discount rate? Shall Cencora undertake the investment project?

Question 17 options:

	PI=0.9327. Cencora shall not undertake the investment project since PI<1.
	PI=2.3390. Cencora shall undertake the investment project since PI>1.
	PI=1.2678. Cencora shall undertake the investment project since PI>1.
	PI= 0.9138. Cencora shall not undertake the investment project since PI<1.

Question 18

What is the internal rate of return (IRR) if Cencora undertakes this project? Based on the IRR, shall Cencora undertake this investment project assuming the weighted average cost of capital is the appropriate discount rate for the capital budgeting problems considered?

Question 18 options:

	IRR=30.12%. Cencora shall undertake the investment project since IRR>WACC.
	IRR=24.89%. Cencora shall not undertake the investment project since IRR
	IRR=21.67%. Cencora shall not undertake the investment project since IRR
	IRR=29.81%. Cencora shall undertake the investment project since IRR>WACC.

Question 19

What is the modified internal rate of return (MIRR) if Cencora undertakes this project? Assuming that the positive cash inflow from undertaking this project will be reinvested at the weighted average cost of capital.

Question 19 options:

	25.71%
	29.07%
	28.59%
	22.28%

Question 20th walnut trees is estimated to be worth $576,000 in 23 years. If you want to realize a 23 percent rate of return on your investment, how much can you afford to invest per acre? (Ignore all taxes and assume that annual cash outlays to maintain your stand of walnut tree are nil.)

Question 20 options:

	$5,382.18
	$4,927.25
	$3,431.07
	$6,816.30