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When does NPV of an investment increases and calculating NPV with return rate

Question

1. All else constant, the net present value of a typical investment project increases when:

a.    The discount rate increases.
b.    Each cash inflow is delayed by one year.
c.    The initial cost of a project increases.
d.    The discount rate decreases.
e.    All cash inflows occur during the last year of a project's life instead of periodically throughout the life of the project.

2. What is the net present value of a project that has an initial cash outflow of $12,670 and the following cash inflows? The required return is 11.5%.

Year        Cash Inflows
  1              $4,375
  2                     $0
  3              $8,750
  4              $4,100

a.    $218.68
b.    $370.16
c.    $768.20
d.    $1,249.65
e.    $1,371.02

Summary

These multiple choice questions belong to Finance. The first and second questions deal with cash flows and net present value. While in the first question, is about net present value and its features and the second question is about calculating net present value with cash inflows.

 

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Comments

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