QUESTION $5$

Dodson Corp. expects a $10-$year replacement project designed to increase the company's productivity to produce an NPV equal to $$1\mathrm{.}5$ million. the project will provide positive cash flows

in years $1$ through $10$ of the project. If the project cash flows end unexpectedly after seven years, what will happen to the project's NPV and IRR?

Increase; Decrease

Decrease; Increase

Decrease; Decrease

QUESTION $6$

Use the following information to answer Questions $6$ and $7.$

Barret Clothing Manufacturers, Inc. is considering adding a new piece of equipment that will significantly increase the production capabilities of their largest U$.$S$.$ manufacturing facility.

The project is expected to last for five years and will require an initial investment of $$1,500,000.$ The net cash flows expected for this expansion project are $$400,000$ per year for each of

the project's five years.

What is the NPV of the project at $10\%?$

$$16,315$

$$1,516,315$

$$1,522,415$

QUESTION $7$

What is the project's IRR?

$11\mathrm{.}02\%$

$9\mathrm{.}85\%$

$10\mathrm{.}42\%$

QUESTION $8$

Jamestown's capital structure consists of $40\%$ debt and $60\%$ equity. The after$-$tax cost of debt for the company is $5\mathrm{.}5\%,$ and the cost of equity is $8\mathrm{.}0\%.$ Jamestown's weighted average

cost of capital is equal to which of the following?

$6\mathrm{.}0\%$

$6\mathrm{.}5\%$

$7\mathrm{.}0\%$