Question: QUESTION 1 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
QUESTION 1
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. | 2.8706 | |
| b. | 4.6218 | |
| c. | 3.7908 | |
| d. | 3.9349 |
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 |
QUESTION 3
Given the information in Question 1, what is the internal rate of return?
| a. | 10% | |
| b. | 8% | |
| c. | 12% | |
| d. | 6% |
QUESTION 4
Given the information in Question 1, what is the profitability index?
| a. | -0.8843 | |
| b. | 1.8843 | |
| c. | 0.8843 | |
| d. | -1.8843 |
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. | $57,567.68 | |
| b. | $65,248.13 | |
| c. | $82,098.45 | |
| d. | $78,120 |
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. | $22,403.52 | |
| b. | $23,304.41 | |
| c. | $19,376.93 | |
| d. | $20,608 |
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